Renowned independent investment strategist Ed Yardeni, the President of Yardeni Research, has lowered his U.S. recession probability while raising his S&P 500 target following the trade deal with China.

What Happened: After the U.S. and China announced a 90-day truce on Monday, the markets cheered the development as the S&P 500 and Nasdaq 100 rallied over 3%.

While this provides a short-term relief, Yardeni noted in his QuickTakes that the negative wealth effect of President Donald Trump’s tariffs was “probably insignificant” after the announcement of the deal.

According to his earlier analysis, the tariff turmoil was having a “negative wealth effect on consumers, especially retired and soon-to-be retiring Baby Boomers, who collectively own about $25 trillion in corporate equities and mutual funds.”

This led him to raise the “subjective probability of a recession” this year from 20% to 35% on March 5, and from 35% to 45% on March 31 as stock prices tanked in response to the tariffs.

However, he said that “We didn’t cross over to the dark side subsequently, i.e., forecasting greater than a 50% chance of a recession. Instead, we lowered our recession odds back down to 35% on May 4. Now we are lowering it again to 25%.”

After Monday’s stock market rally, he also raised the S&P 500 year-end target back up to 6,500 from 6,000.

See Also: S&P 500 Rallies Over 3% On US-China 90-Day Tariff Truce, But Experts Warn It ‘Doesn’t Guarantee A Complete Resolution Of The Trade War’

Why It Matters: Concerning other metrics, Yardeni highlighted that he has raised the real GDP growth range to 1.5%-2.5% this year, up from our previous 0.5%-1.5%.

Also, he predicts the S&P 500 forward earnings to rise to $300 per share at the end of this year.

“We now see the S&P 500 forward P/E at 21.6 at the end of the year rather than 20.0 as we previously had projected,” he said.

Price Action: The SPDR S&P 500 ETF Trust ( SPY ) and Invesco QQQ Trust ETF , which track the S&P 500 index and Nasdaq 100 index, respectively, jumped with joy on Monday. The SPY was up 3.30% to $582.99, while the QQQ advanced 4.07% to $507.85, according to Benzinga Pro data.

Here’s how the benchmark indices performed on Monday.

After Monday, all the indices were out of the correction zone. The S&P 500 index was down 4.93% from its record high of 6,147.43 points, scaled on Feb. 19. Dow Jones was 5.91% lower than its 52-week high of 45,073.63 points, and Nasdaq 100 was 6.09% lower than its previous high of 22,222.61 points.

On Tuesday, the futures of the Dow Jones, S&P 500, and Nasdaq 100 indices were trading lower.

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