Key insights
- Yardeni Research raised its S&P 500 year-end target to 8250, citing an "earnings-led melt-up." This rapid, unsustainable surge, driven by strong earnings and investor frenzy, could precede a significant market correction. While earnings are strong now, the article suggests the current rally's pace is unsustainable given geopolitical and monetary policy uncertainties, increasing the risk of a future meltdown.
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Stock market bulls see the S&P charging toward new records. But if the latest rise is a mark of froth, some experts say, look out on the way down.
Yardeni Research, market veteran Ed Yardeni's eponymous firm, on Sunday raised its year-end S&P 500 target from 7700 to 8250. That's a decidedly upbeat outlook, at or near the top of the pile of Street estimates, suggesting double-digit upside on top of year-to-date gains already near that level. But the reasoning behind the hike—what Yardeni and his team call an "earnings-led melt up"—suggests U.S. stocks' fast and furious rally could end in a meltdown.
A so-called melt-up is a fast, unsustainable surge in prices, driven in part by frenzied investors, setting the stage for extremes in the other direction. If the S&P—already up more than 16% since the end of March, with the Nasdaq Composite up some 26%—hits Yardeni's number, the benchmark index will have notched 2026 gains of more than 20% at a time marked by geopolitical tensions, a global energy supply shock, and an uncertain path forward for monetary policy.
Market experts are circling a fresh S&P 500 target that implies double-digit stock returns for the year, but what's driving those gains might not be something to cheer about.
Think it sounds a bit absurd? You're not alone, with some market experts using the word "crazy" these days and others wondering when the music might stop. The force pulling stocks higher, many say, is earnings, with companies posting big profit growth and expected to keep doing so. As of Friday, with results for nearly 90% of the S&P 500 in the books, more than 80% of companies had beaten earnings expectations, according to FactSet, with numbers in the aggregate landing some 18% higher than expected.
Consensus earnings-per-share estimates were recently around $336.49 for 2026, and $386.70 for 2027, higher than Yardeni's original estimates of $310 and $350, respectively, according to the firm. Yardeni has raised its EPS estimates to $330 and $375, but maintained its valuation assumptions, implying the S&P could keep climbing—or fall back to 6,750, were it was about a month ago.
"We've been bullish on earnings, but not as bullish as the recent consensus of industry analysts. We've never seen consensus earnings expectations rise so quickly for the current and coming years as they have in recent months," Yardeni and his team wrote. "The result has been an earnings-led melt-up in the stock market."
The high end of Yardeni's range exceeds top Street forecasts. Deutsche Bank and Morgan Stanley, for example, at the end of April saw the S&P hitting 8,000 and 7,800 respectively.
A big part of what's driving the market higher is chip stocks, which have issued powerhouse earnings numbers and strong outlooks and have booming shares. Ben Carlson, who manages portfolios at adviser Ritholtz Wealth Management, observed that shares of Intel (INTC), Sandisk (SNDK), and Western Digital (WDC) were "going vertical." Those three stocks are up anywhere between almost 500% to over 4,000% just over the past 12 mos. "This is certainly starting to feel like a melt-up," Carlson said in a recent post on his blog A Wealth of Common Sense.
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