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Dr. Ed Yardeni, President and Chief Investment Strategist at Yardeni Research, is doubling down on his “Roaring 2020s” thesis with a 10,000 target for the S&P 500 by the end of this decade. In a recent podcast conversation with FS Insider, Dr. Yardeni shared his latest views on the resilience of the US economy, tariffs, the stock market, AI’s role in productivity, and where investors might look for opportunities in a world increasingly transformed by technology. Here’s what you need to know.

A Bull Market Fueled by Earnings—Not Hype

When Dr. Yardeni last joined us on the show, the market was reeling from a sharp downturn following the Trump administration’s sweeping tariff announcement in April. Despite the turbulence, Dr. Yardeni remained optimistic, predicting the S&P 500 would recover to hit 6,500 by year-end. That call proved accurate as that milestone was reached in recent weeks.

Yardeni is now calling for the S&P 500 to hit “7,700 by the end of next year,” driven not by ever-expanding valuations but by rising corporate earnings. “I’m assuming that from here on, it’ll be an earnings-led bull market rather than a valuation-led bull market,” he explains. While today’s price-earnings multiples are historically high (about 22 times earnings), Yardeni expects profits to keep climbing, with S&P 500 earnings per share growing from $265 this year to $300 next year and $350 by 2027.

His math is straightforward: “Three hundred times 22 gives you 6,600. And the same kind of arithmetic works for next year... $350 times 22, which is 7,700.”

Why the Roaring 2020s Could Be Different

What’s behind this bullishness? Yardeni sees powerful echoes of the 1920s, but with a crucial twist: today’s technological revolution is supercharging productivity across the economy. “Productivity is sort of the fairy dust of the economy. It makes everything go better—you get better real GDP growth, lower inflation, real wages going up, and profit margins go up as well,” he says.

The digital revolution, he argues, started with mainframes in the 1960s and has only accelerated, from PCs to smartphones to the cloud and now artificial intelligence. Each wave has allowed us to process more data, faster and cheaper, unleashing new business models and innovation.

While some worry that automation could displace workers, Yardeni isn’t buying it: “That idea has really never panned out historically. And right now, we kind of have a shortage of workers.” With aging demographics and slowing population growth, especially in the West and China, “we need to augment the skills of our current workforce with technological innovations... including AI.”

Tariffs, Trade Wars, and Resilient Markets

Given the historical dangers of tariffs—recall the infamous Smoot-Hawley Tariff and the Great Depression—how worried should we be about today’s trade tensions? Yardeni acknowledges the risks but sees important differences. “In the 1930s, the economy was much more dependent on goods... The service economy is much bigger these days.” While tariffs are elevated, he notes, broad retaliations haven’t materialized (except with China), and the economy “continues to slug on ahead.”

His bottom line: today’s challenges—pandemics, inflation, Fed tightening, and tariffs—have merely demonstrated the U.S. economy’s resilience. “I don’t have a recession over the rest of the decade. It doesn’t come with a money-back guarantee, but... the economy is resilient.”

AI, the Cloud, and the Digital Revolution

Yardeni is especially enthusiastic about AI’s role in the ongoing digital revolution. He sees AI as the next logical step in the decades-long quest for better, faster, cheaper data processing. “We now don’t have to own the software. We can rent it... and process information on the cloud,” he observes. “AI... allows us to process more and more information more cheaply and faster.”

He’s candid about the challenges: “Some of the efforts with large language models may turn out to not be worth the effort because of hallucinations and all kinds of other issues. But... we are going to find that AI is a productivity enhancer.”

Yardeni practices what he preaches, using multiple AI chat models daily as research assistants—“kind of like Google Search, but it does a lot of the homework for you.” He envisions a future where “we can talk to four or five of these systems and have them do a little debate,” with humans as the final arbiters.

Market Leadership: Mag 7 vs. Small and Mid-Caps

With so much attention on the tech giants, what about smaller stocks? Yardeni notes that “the Magnificent Seven”—the largest tech firms—now make up 30% of the S&P 500 and are both fierce competitors and collaborators. Their dominance, he says, is partly why small- and mid-cap stocks have lagged: “You’re never going to be able to buy the next Microsoft out of the gate... the Magnificent Seven... have the free cash flow to just kind of buy anything on the planet Earth that they think they might be able to turn into a big hit.”

Still, Yardeni suggests investors take some profits from large-cap winners and “rotate them into the SMID-cap of the same sectors.” Particularly, he sees potential in smaller industrials and financials, which have begun to recover.

Looking Ahead: “10,000 by the End of the Decade”

Dr. Yardeni’s final S&P 500 target? “10,000 by the end of the decade... using $400 a share.” His thesis depends on continued innovation, strong earnings, and the staying power of today’s market leaders. Yet, he cautions, even the best forecasts aren’t guarantees: “The critical assumption here is the idea that the Magnificent Seven are going to stay magnificent. They’re not going away.”

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