The U.S. bull market is intact — and a key signal is coming from Tel Aviv, says this strategist

Strategist Ed Yardeni asserts the U.S. bull market's integrity, citing the market's sanguine reaction to geopolitical tensions and the Tel Aviv stock exchange's record highs as indicators. His base case anticipates Iran pursuing peace, which would lead to lower oil prices and sustained equity gains, underpinning his S&P 500 targets of 6,500 by year-end and 10,000 by decade-end, supported by rising earnings forecasts and a 'Roaring 20's' outlook.

Analysis

Market sentiment appears remarkably robust, absorbing geopolitical shocks with a bullish bias, a view articulated by strategist Ed Yardeni. The primary signal supporting this outlook is the performance of the Tel Aviv stock exchange, with the iShares MSCI Israel ETF (EIS) reaching a record high, suggesting that investors are pricing in a de-escalation of regional conflicts. Yardeni's base case posits that Iran will not retaliate significantly, leading to a decline in oil prices (CL.1) and a continued rally in global equities. This optimism is underpinned by strong fundamentals, as S&P 500 forward earnings forecasts have hit a record high for the third consecutive week, indicating analysts are discounting the potential impact of tariffs on corporate profitability. Yardeni maintains that the bull market, which began in October 2022, remains intact, projecting an S&P 500 target of 6,500 by year-end. However, a significant risk scenario is acknowledged: a hostile Iran could disrupt the Strait of Hormuz, causing an oil price spike and increasing the probability of a global recession. For gold (GC00), a near-term price retreat is possible as haven demand wanes, but long-term support is expected from central bank diversification.

Key Decisions for Investors

• Given the strategist's analysis and rising S&P 500 earnings forecasts, maintaining a constructive outlook on U.S. equities appears warranted, as the primary thesis argues the bull market remains intact.
• Investors should closely monitor geopolitical developments in the Middle East, as any attempt by Iran to close the Strait of Hormuz represents the key risk that could invalidate the bullish thesis and trigger a sharp rise in oil prices.
• Consider gold's price action as a potential long-term buying opportunity on any dips caused by waning safe-haven demand, given the underlying support from central bank purchases.
• Note the valuation of the energy sector, which is reportedly trading below its historical price-to-earnings ratio, potentially offering a tactical hedge or value-oriented exposure against the primary geopolitical risk scenario.