The S&P Hit a Record. 73% of Stocks Are Below Their 50-Day. What Is Your Index Fund Betting On?

Ed Yardeni says consumer spending, AI-related capital spending, and a $1.7 trillion federal deficit are supporting growth and earnings, which he calls “FIMO”—a healthier basis for a bull market than FOMO. He targets 7,900 for the S&P 500 by year-end and 8,400 by the middle of next year, while remaining bullish on earnings and stocks.

The speakers cite approximately 27% year-over-year S&P 500 earnings growth in Q3, but say the strength may be concentrated in fewer than a third of companies and has raised expectations that could be hard to sustain. They warn that a substantial earnings decline could leave stocks in a speculative environment even if valuations do not look unreasonable.

Yardeni argues that oil around $90–$100 could keep inflation sticky and lead central banks to raise rates, potentially pushing yields higher; he also warns that governments and companies that built up debt expecting near-zero borrowing costs could face pressure. The speakers say recent rate increases have largely reflected growth rather than the inflation-driven increases of 2022, and that stocks have so far been more resilient, though whether growth continues to drive rates remains uncertain.

The speakers argue that passive flows can reinforce momentum by increasing the index weight of rising stocks, while warning that passive investing is not a substitute for evaluating companies and assigning prices. Chris Davis offers a speculative extension: if companies such as SpaceX, Anthropic, and ChatGPT enter indexes, they could lift index valuation multiples and deepen sector and thematic concentration.