Investing.com -- Yardeni Research, which holds the highest year-end S&P 500 target on Wall Street at 8,250, said it is turning cautious on equities in the near term despite the index climbing above 7,600 for the first time.

"We are turning cautious about the prospects for the stock market in the coming weeks," the firm wrote.

Yardeni cited several risks on the horizon, including an unresolved Middle East conflict and warnings from Exxon and Chevron executives that global oil inventories are dangerously low and prices could spike to $150 a barrel or higher.

The firm also flagged the possibility that the Federal Reserve could shift from an easing to a tightening bias this month, potentially followed by a rate hike in July, alongside three large upcoming IPOs that could add to market volatility.

The cautious turn comes despite Yardeni’s broadly constructive economic outlook. The firm said the recent rally has been driven by what it calls Fabulous Earnings Momentum, or FEMO, rather than fear of missing out, and argued that an earnings-led advance is more sustainable.

Yardeni also pointed to signs that the AI boom may be spreading beyond financial markets into the broader economy.

April job openings surged to 7.62 million, the highest since May 2024, while the ISM manufacturing PMI jumped to 54.0 in May, its highest reading since May 2022. The Atlanta Fed’s GDPNow model estimates Q2 real GDP growth at 3.0%.

"The AI boom may be spreading to Main Street," Yardeni wrote.