Investing.com -- Yardeni Research has reiterated its target for the S&P 500 index at 6,100 by the end of the year. For the tech-heavy NASDAQ Composite, the firm forecasts it to reach 20,000 by mid-2025, with the potential to hit this target even sooner than anticipated.
“The stock market rally has been broadening since Election Day,” Yardeni said in a Sunday note. “We expect it will continue to do so in the Trump/Musk/Vivek/Santa rally that should continue through the end of this year.”
The firm references President Trump's 1987 book, "The Art of the Deal," as a foundational element of his successful reelection and the Republican party's clean sweep.
Trump's strategy, according to Yardeni, is focused on leveraging the US economy to bolster American global interests. The president's plans include using tariffs as a negotiation tool and addressing federal deficits.
In line with these goals, Trump has tasked Elon Musk and Vivek Ramaswamy with fiscal responsibilities and has nominated a team of 15 Cabinet Secretaries aimed at reducing costs and the size of federal bureaucracies.
The stock market has responded favorably to Trump's economic policies, with the S&P 500, NASDAQ, and Dow Jones Industrial Average (DJIA) reaching all-time highs.
Trump's recent nomination of Scott Bessent as the next Secretary of the Treasury was also well-received by the market, signaling a commitment to tackling the deficit issue.
At the same time, this announcement led to a decrease in yields for both the 2-year and 10-year US Treasury notes last week, calming concerns about inflation and budget deficits. The recent weakness in the Citigroup (NYSE:C) Economic Surprise Index also weighed on yields.
“We are expecting that the next batch of economic indicators will be stronger than expected, reflecting a rebound from October's weather-depressed readings and also the unleashing of animal spirits following Trump's victory,” Yardeni noted.
“So we are sticking with our forecast of 4.25% to 4.75% for the 10-year Tbond, for now,” it added.
Despite the recent rally, Yardeni points out that the stock market sentiment appears to be split, as indicated by contrasting indicators from the past week.
The Investors Intelligence Bull/Bear Ratio surged to 3.46, suggesting a bullish sentiment that exceeds the historical average. In contrast, the American Association of Individual Investors (AAII) Bull/Bear Ratio dipped below its average, pointing to a “mixed sentiment” among investors.
“It is likely to get more bullish if the year-end rally persists, as we expect,” Yardeni continued.
This, it added, may set up the market for a significant pullback at the start of 2025.