The stock market is overloaded with bears. That could mean investors will bail too soon on equities, cautioned Ed Yardeni.

U.S. stocks are lower in early trading following the long holiday weekend, as fresh trade tensions simmer around China and the dollar slumps on worries over Fed Chair Jerome Powell’s job stability. It will also be a big week for earnings, so strap in.

There are so many bearish investors out there that it’s bullish for stocks. That’s the gist of our call of the day from the president of Yardeni Research, Ed Yardeni, who urged investors not to write off 2025 quite yet.

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Peter Berezin told you so — or he tried to, at least.

The chief global strategist of BCA Research defied consensus wisdom by predicting late last year that US stocks would sink in 2025 as a full-blown trade war caused a global recession.

A few months later, markets have been hit by one of the largest downturns on record caused by unrest from President Donald Trump’s tariff policy. Berezin looks brilliant, but he’s not gloating.

“I’ve been in this business long enough to know that victory laps — more often than not — you don’t even get around the bend before you’re proven wrong by something,” Berezin recently told Business Insider.

For a bit, it looked like Berezin’s base case would be woefully off-base. The strategy chief acknowledged that doubt crept in as the S&P 500 rallied convincingly to start the year.

“You always have to question your assumptions,” Berezin said. “If you don’t, you’re not really doing your job properly.”

But Berezin held firm to his convictions. Investors who were burned by doubting Trump after his win back in 2016 were giving him the benefit of the doubt this time, despite the risk tariffs posed.

“Everybody who was positioned for Trump being bad for markets lost money, and they didn’t want to make the same mistake again,” Berezin said.

Berezin, who was Goldman Sachs’ senior global economist before joining BCA, said he can afford to take more risks at an independent research firm than he could at an investment bank.

“If you’ve got a bearish strategist saying ‘Stocks are going to go down, the economy is going to be horrible’ — that’s not good for the bank,” Berezin said. “There’s much more of a career risk for my former colleagues on Wall Street in being bearish and wrong, than for me in being bearish and wrong. If I turn out to be wrong, but I’m out of consensus, at least I’ve said something interesting.”

‘To hell with the stock market’

Berezin has been a bear in a sea of bulls, and he’s not changing his tune now.

The market’s 19% plunge from its peak has been brutal, but Berezin thinks there’s even more downside ahead. He’s not moving his year-end S&P 500 price target of 4,450 and said the index can slip to 4,200, which would constitute a 31.6% drawdown from the late-February high.

“It sounds pretty bearish and, relative to my peers, it is very bearish,” Berezin said. “But you don’t really have to make any outlandish assumptions to get to something like 4,200.”

All it would take for the S&P 500 to settle at 4,200 is a 10% decline in earnings estimates and a 17x earnings multiple, Berezin said. That would be well below where US stocks have traded, but it’s very much in line with historical averages.

Even if stocks fall that far, Trump might not care. In fact, Berezin said he might find it amusing.

“Trump is this type of guy: You’re either his friend, or you’re his enemy,” Berezin said. “If the stock market — from his vantage point — is not playing along with his agenda, then ‘to hell with the stock market.’ In his mind, the further it goes, the less he cares.”

Although this is speculation, Berezin thinks it would be consistent with Trump’s personality. He continued: “I think that’s a real risk that he just says, ‘Listen, I’m sick of these “globalists,”‘ as he calls them. ‘I’m not going to placate them. My base loves me, and my base doesn’t really care that much about the stock market.'”

Investors have been reflexively trained to buy the dip in markets since it has paid off historically. When Berezin spoke with BI on Tuesday morning, the S&P 500 was soaring 3.8% higher. But that relief rally soon faltered and then reversed, as the market veteran had predicted it would.

“The market’s view is colored by this hope that — somehow, someway — a trade war would be averted,” Berezin said. “I don’t think that hope was ever particularly realistic, and I think we’re seeing again that hope spring up this morning. And it’s going to be dashed again.”

Cash is king during this downturn

There aren’t many places to escape in a market like this, Berezin said.

“Usually you hide in bonds, but this is not a great place to hide in now because of rising inflation and foreigners having second thoughts about holding so many Treasuries,” Berezin said.

Instead, the strategy chief recommends keeping a large stockpile of cash, which can still yield 4% or so in high-yield savings accounts, or gold, which is on a feverish tear in the last year.

As bearish as he may be, Berezin emphasized that he doesn’t recommend getting out of stocks entirely.

Those who are looking for safer sectors to wait out this storm should consider defensive parts of the market like consumer staples and healthcare, he said, which are the two best-performing sectors so far this year. Even still, they’re in negative territory, which is a sign of the times.

After the tariff drama began to unfold in late March and early April, most Wall Street strategists did not hesitate to lower their price targets for the benchmark S&P 500 (SNPINDEX: ^GSPC). After all, elevated tariff rates could increase inflation and slow the economy, potentially leading to a recession or some kind of stagflation scenario that would make the monetary tools at the Federal Reserve’s disposal less effective.

But through the last month and a half, one of Wall Street’s most bullish strategists coming into the year, Wells Fargo’s Christopher Harvey, hasn’t flinched. He hasn’t once changed his roughly 7,000 price target for the S&P 500, which is now the highest among his peers. And he still thinks that price target is achievable this year. Here’s why.

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Reading through Trump’s negotiating tactics

Heading into President Donald Trump’s second term as president, some investors believed in an idea called the Trump put. During his first term, Trump regularly cited strong market performance, and investors didn’t think Trump would do anything that would hurt the stock market. However, after the tariff announcements in early April, this theory went out the window as the S&P 500 fell as much as 21% from the all-time high it reached in February.

Person looking at chart on computer.

Image source: Getty Images.

It seemed that Trump would do whatever it takes to reorder global trade and bring higher-paying manufacturing jobs back to the U.S. after decades of what he considered unfair treatment by other countries and their trade policies with the U.S.

However, Harvey told MarketWatch that he didn’t think Trump would ultimately follow through on the elevated tariff rates, saying:

We felt the second half [of 2025] was always going to be much better. We thought that tariffs were a negotiating ploy, which turns out mainly to be true. We thought the underlying economy and the strength of the consumer, while not pristine or stellar, were still solid …

So far, Harvey has called it right. Both the U.S. and China have temporarily lowered tariffs against one another’s goods as they try and hammer out a broader deal. And it seems like the worst of the tariff negotiations is now in the past.

Recent economic data has also suggested the economy may be in better shape than feared. The U.S. added more jobs than expected in April, while inflation data pointed to cooling prices. Rate cuts by the Fed could help lift the S&P 500.

“What we’re seeing is inflation expectations are coming down,” Harvey said. “Some of our research is also indicating to us that corporations are not elevating prices the way the narrative is being portrayed. To that effect, price increases are quite modest.” If broader economic uncertainty can be reduced, Harvey thinks tailwinds around artificial intelligence (AI) and increased mergers and acquisitions activity will resurface.

Harvey doesn’t see a repeat of the dot-com bubble in AI. While internet and telecom in the late 1990s and early 2000s were being funded by companies with too much debt, much of the AI capital expenditures today are being funded by massive hyperscalers with fortress-like balance sheets. The big risk Harvey sees weighing on the market are higher interest rates. The yield on the 10-year Treasury note remains elevated around 4.5% (as of May 15).

Can the S&P 500 hit 7,000?

I still see some challenges weighing on the market, including higher rates, as Harvey mentioned, and the continuing tariff saga. The fast pace of news has made it easy to forget that tariffs could still end up being quite elevated relative to previous levels.

While Trump paused high tariff rates on Chinese imports, it still looks like most of the major trading partners face at least a blanket 10% tariff on imports. There are also still 25% tariffs on steel, aluminum, and auto parts, although the administration has now provided some offsets to the auto tariffs. These, along with some signs of a weaker consumer, could still impact the economy negatively.

That said, the market may be able to work through tariffs if there is more clarity. A 10% blanket rate is still way better than the reciprocal rates Trump introduced on “Liberation Day” back in April. Furthermore, recent economic data suggests that consumers and the economy are holding steady for the time being. This leads me to believe the market can move higher this year.

I feel less confident about the S&P 500 hitting 7,000, but somewhere in the low to mid 6,000s could still be attainable.

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