This is a 'buying the dip' market particularly in AI, says Ed Yardeni

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Ed Yardeni 9.0

This is a 'buying the dip' market particularly in AI, says Ed Yardeni

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We're in a bull market. The year has been volatile, but we are at all-time highs recently. Expecting a solid Santa Claus rally in Nov-Dec adding about 4%. Strong earnings, buy-the-dip AI market, valuation levels reasonable for the Magnificent 7 and market breadth support an upward trend in the short term.

10/27/2025 1:01:15 PM	short term up	6 days later	-0.15%	-0.15%
9/19/2025 1:42:29 AM	short term sharp up	7 days later	-0.60%	-0.91%
9/11/2025 10:44:08 PM	medium term sharp up	20 days later	+3.32%	+4.98%
9/9/2025 5:01:26 PM	medium term up	20 days later	+3.48%	+3.48%
8/25/2025 2:53:09 PM	medium term up	20 days later	+3.27%	+3.27%

Stock futures higher especially the NASDAQ this morning as it looks like the government will reopen. The Senate took the first step towards ending the government shutdown.

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Joining us now, Ed Yardeni, president at Yardeni Research. Thought about you a couple of times recently, Ed. One, when we were at 6900 on the S&P and you were thinking 7000, and maybe even further by year end.

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Then I thought about Tom Lee with similar targets but said near-term it would be bumpy due to AI worries. Is that finished or more to come?

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Ed Yardeni

Tom and I view the market similarly. A week ago, the bull bear ratio was over four indicating too many bulls. Last week seemed to clean out some bulls. I think this is a buy-the-dip market, especially in AI. There's nervousness about AI but that’s a good thing. In the late 1990s tech bubble, no one saw the wreck coming unlike now where many worry about a bubble. I think AI is an app with widespread usage and the payoff is in the cloud providers making a fortune from AI.
I think the hardest thing to embrace is usually the right thing—when you're feeling sick to your stomach, that’s when to buy rather than sell. Maybe we don’t understand how transformational AI could be and won’t for a while.

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Ed Yardeni

Earnings have been surprisingly strong, forming a floor under the market. Not due to multiple expansion, which Fed could influence, but earnings are much better than expected.
What about forward S&P multiples now?

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Ed Yardeni

Forward PE is around 22 to 23, similar to levels after pandemic lockdown easing. Many feel uncomfortable but it’s supported mainly by the Magnificent 7, which are trading at 30 times forward PE. The rest of S&P 493 trades around 19 to 20, which isn’t cheap but also not crazy.
Is 7000 by year end still your target?

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Ed Yardeni

Yes, we are in a bull market. The year has been volatile, but we are at all-time market highs recently. I expect a solid Santa Claus rally focusing on November and December, which usually adds about 4%.

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