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Investing.com -- Yardeni Research has reduced its odds of a U.S. recession in 2025 to 25%, citing a rally in stock prices and resilient economic data.
The firm also raised its year-end S&P 500 target to 6,500, up from 6,000.
“After today’s stock market rally, the negative wealth effect is probably insignificant,” the firm wrote, referencing concerns that a drop in equity values could hurt consumer spending, especially among Baby Boomers who collectively hold about $25 trillion in equities and mutual funds.
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Yardeni had previously raised recession odds to 45% in March due to what it called “Trump’s Tariff Turmoil,” but held back from predicting a recession outright.
The firm has now dialed back its recession forecast in stages, lowering it to 35% on May 4 and again to 25% following the market’s rebound.
Yardeni is also turning more optimistic on earnings and growth. The firm still expects S&P 500 forward earnings to reach $300 per share by year-end but now sees a higher forward P/E ratio of 21.6, up from a prior estimate of 20.0.
Its real GDP growth forecast has also been raised to a range of 1.5%-2.5% for the year, from a previous 0.5%-1.5%.
“The S&P 500 is only 5.9% below its record high on February 19,” Yardeni noted, with the index now trading above both its 50-day and 200-day moving averages.
In addition to strong payroll tax receipts and improving loan availability, Yardeni said that “we aren’t ready to bet against the resilience of the U.S. economy in general or its consumers in particular.”
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