Wall Street is rising again after the interest-rate hike decided by the Federal Reserve, but caution among major American analysts is growing for the coming months. One of the most closely followed names has lowered his year-end target for the S&P 500, while other investment firms point to a market that has gone too long without a correction. Here is what is happening and which levels to watch.
A Permabull Chooses Caution
One of the most closely followed figures is Ed Yardeni, president of Yardeni Research, who is considered one of Wall Street’s so-called permabulls. The term refers to analysts who almost always expect further gains, and in recent years his optimistic forecasts have been broadly confirmed by events. He also coined the expression bond vigilantes, referring to bond investors who punish excessively indebted governments by selling their government bonds. For this reason, his step back toward caution is attracting considerable attention among market participants.
Ed Yardeni Lowers His S&P 500 Target
In a client note dated September 16 and titled Proceed With Caution, Yardeni lowered his year-end target for the S&P 500 from 8,400 to 7,900 points. The revision comes just one month after he raised the target, when his estimate was the highest on all of Wall Street. Yesterday, the S&P 500 touched support around 7,580 points and rebounded, reaching resistance at 7,710 points today.
According to the analyst, the risks of a downward phase have increased over the next 3–6 months. Factors weighing on the outlook include the yield on the U.S. 10-year T-Note, which is above 5%, higher oil prices and the Federal Reserve’s recent decision to bring interest rates to 3.75%–4.00%. The long-term outlook remains unchanged, however, with a target of 10,000 points by the end of the decade and no recession expected.
Other Investment Firms and Banks Urge Caution
The chorus of caution toward the S&P 500 has grown in recent days. Bank of America has noted that in 2026 the index has recorded only one decline of at least 5%, compared with the three typically seen in a normal year. The September–October two-month period is also the weakest of the year, with an average decline of 0.6% based on data since 1928. Wells Fargo sees a late-cycle phase and estimates downside risk of between 5% and 10%. There is also a contrasting view, as Goldman Sachs considers any potential pullbacks normal and maintains a constructive view of the trend.
What History Says About Rate Hikes
The historical record of the relationship between rising interest rates and the performance of the S&P 500 offers a less negative picture than might be expected. According to data from LPL Research, during the six tightening cycles launched since 1994, the index struggled during the first four months before recovering ground. Twelve months after the first rate hike, the average gain was 6.7%, with a median of 10.7%.
Even more relevant is the data on rate hikes that occur after at least six months without any change in interest rates—the current configuration. In the 12 cases recorded since 1972, the index gained an average of 5.5% over the following 12 months. However, the average maximum decline during those 12 months after the hike was 9.4%, meaning that frequent interim swings occurred. The major exception remains 2022, when an extremely rapid tightening campaign against inflation kept the index in negative territory for more than a year. In the coming months, bond yields, oil prices and the ability of the 7,600-point area to hold will be the key factors under scrutiny.
