Yardeni Sees Peak Treasury Yields Near 5% as Buying Opportunity

Ed Yardeni, a veteran market strategist, is telling investors to prepare to lean in. Yardeni Research expects the 10-year US Treasury yield to peak between 4.75% and 5%, a level it views as a buying opportunity for both bonds and equities.

The 10-year yield started the year at 3.96% and has climbed to 4.63%, a move of roughly 67 basis points. The S&P 500’s forward P/E multiple has risen from 19.1 to 21.1, creating a divergence that Yardeni says increases the risk of a P/E-led pullback.

Part of the thesis hinges on expectations around the Federal Reserve’s next moves and the potential influence of Kevin Warsh as Fed Chair. The firm expects the Fed to hold rates steady in June and then pivot to a tightening bias, with a possible rate hike in July under Warsh’s leadership. Brent crude prices hovering around $111 per barrel are adding to inflation expectations, making it harder for the Fed to justify rate cuts.

Despite near-term caution, Yardeni Research maintains a bullish S&P 500 target of 8,250 by year-end. The firm argues that a P/E-led pullback is shallower than an earnings-driven decline because company fundamentals remain intact.

If 10-year yields approach 5%, Yardeni says bonds will offer compelling real returns and equity valuations will be compressed enough to warrant new positions.