Ed Yardeni, founder and chief investment strategist at Yardeni Research, who is known for his bizarre but accurate predictions, has shared his bullish forecast for stocks.

In the latest review, he stated that the stock market's rally was expected but "ahead of schedule", signaling a potential pullback in the near term. The expert noted investor enthusiasm over AI’s potential, which helped equities rebound from last year's steep losses. Thus, market participants should now prepare for a "Santa Claus rally" that could last throughout the fourth quarter.

"We concluded that the [S&P 500] index might fall to its 200-day moving average, which is currently around 4,200. We see a year-end Santa Claus rally back to 4,600, or close to that level," the strategist explained.

The current dynamic of the S&P 500 is rather subdued. Yardeni predicts that the index could dip to 4,200 in October before resuming its climb. Notably, the scenario assumes no prolonged auto strikes, government shutdowns, or unexpected credit losses by banks.