Ed Yardeni breaks down the 2026 stock market outlook, revealing how investors could see double-digit gains even as the Mag 7 tech giants fall behind.
00:00 Introduction
00:23 Can Markets Rise Without Big Tech?
01:49 Bullish Areas Within Tech
03:13 One-Word Outlook for 2026
03:20 How High Can Markets Go?
04:29 What Drives Another 10% Gain?
05:52 Labor Market Risks
07:50 Biggest Risk to Markets in 2026
09:05 Best Investment Advice
09:39 Underweight Mag 7 but Bullish Nasdaq?
Transcript:
Caroline Woods
My next guest is dialing back his expectations for Big Tech heading into 2026. Ed Yardeni is President of Yardeni Research. He joins me now. Ed, thanks so much for being here.
Ed Yardeni
Thank you.
Caroline Woods
So add underweight tech heading into the new year overweighting the rest of the market. Talk to us about how that actually plays out. Can this market move higher without big tech leading the way?
Ed Yardeni
Well I’m specifically focusing on underweight in The Magnificent Seven. Those are clearly the biggest tech. And the idea is that artificial intelligence is creating actually a lot of competition among the Magnificent Seven. I’ve been using that the Game of Thrones analogy, for quite some time. The very definition seven kind of, rule their own fiefdoms, they prospered, focusing on, their specific, specific businesses they were good at.
And they had big moats around them. But as a result of AI, they’re spending like, crazy and, and increasing capacity. And in their networks, they are spending like, crazy and, getting the top employees they can and AI and that’s going to start, cutting into their profit margins. So I would say, it’s time to, cut them back a bit.
They’re about 30% of the market cap of the S&P 500. So there’s certainly room to reduce their your exposure in that area. And I would just continue to overweight maybe put more in financials industrials and a sector that I haven’t been talking much about health care I think could do very well in 2026.
Caroline Woods
What about sticking with tech for just a second under waiting the mag seven. What about the rest of the sector? Are there other areas within tech that you would still be bullish on?
Ed Yardeni
Well, I think semiconductors generally speaking. All right. But they’re two they’ve had a huge run. Their multiples are very high. And we are seeing more and more comp competition. I think, in the communication services area, it’s basically meta. And Netflix, I think those, two stocks still can perform well. And so I would say that, the, the, the combination of information technology and communication services, those two sectors alone, account for 45% of the S&P 500.
And, I’ve been for quite some time saying overweight the two. But I find myself saying, how can you overweight something that’s already 45% of the S&P 500, unless you think it’s just going to kind of be the blob and swallow up the entire S&P 500. And I don’t think that’s the case. I think, the more opportunities in what I call the impressive 493, which is everything but the Magnificent Seven and the impressive 493 are the, the customers of the Magnificent Seven.
They’re the ones that are using these technologies to boost their productivity, their profit margins and their profits.
Caroline Woods
So if you had to describe your market view for the new year in one word, what would it be?
Ed Yardeni
Bullish.
Caroline Woods
How bullish? How much higher can the market go in 2026.
Ed Yardeni
Well you know we’ve had three years now of double digit gains. In the high teens and low 20s, and a year over year percent change. That’s quite remarkable. It’s unusual to have a fourth year, but I think we are going to have a fourth year of double digit gains with a gain of, 10%.
So I’ve got the market going from about where it is now, which is pretty close to 7000, up to 7700 by the end of the year. But then, I’ve had a, get more bullish kind of, overlay on my outlook. And I’ve called it the roaring 2020s. I think by the end of the decade, that is, by the end of 2029, I think the S&P 500 could be at 10,000, and that would be based on the market anticipating $500 a share, for the S&P 500 in 2030, with a multiple of of 20, that gives you 10,000.
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