(Bloomberg) — US stocks can soar to fresh highs thanks to the Federal Reserve’s aggressive half-point interest rate cut last week, but it also could cause inflation to resurface if central bankers don’t tread carefully, according to Wall Street strategist Ed Yardeni.

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The latest policy decision lifted the odds of an “outright melt-up” in equity prices — like during the dot-com bubble when the S&P 500 Index roared 220% from 1995 to the end of the century — to 30% from 20%. He placed the chances of a bull market at 80%, while reserving a 20% probability for a 1970s-like scenario, when stock markets around the world were gripped by volatility due to inflation and geopolitical tensions.

But there’s a broader risk if things start running too hot.

“If they overheat the economy and create a bubble in the stock market, they’re creating some issues,” the founder of eponymous firm Yardeni Research Inc. said in an interview with Bloomberg Television Monday. He added that the Fed is ignoring the upcoming US presidential election, in which both candidates are proposing policies that could trigger inflation.

The remarks come as policymakers reiterate confidence in their decision to deliver an outsized cut to kick off the easing cycle. Minneapolis Fed President Neel Kashkari on Monday said he supported the half-point reduction but that he expects smaller quarter-point moves at the November and December meetings. Meanwhile, his Atlanta counterpart Raphael Bostic said last week’s large move will help bring interest rates closer to neutral levels as the risks of managing inflation and employment become more balanced.

Stocks had a tough start to the month, with the S&P 500 Index dropping more than 4% in the first week. But since then, investor confidence that officials can engineer a soft landing has grown, putting the broad equities benchmark on pace for its best September — historically the index’s worst month of the year — since 2019.

Yardeni again leaned into his idea that markets are in a new “Roaring ’20s” period, marked by productivity, growth and substantial equity returns. However, he said his odds of such a scenario fell to 50% from 60% previously.

The soothsayer, typically among the most bullish forecasters on Wall Street, has an S&P 500 target of 5,800, according to the latest Bloomberg survey of strategists. That once eye-popping forecast now looks in line with many of his optimistic peers, who’ve steadily lifted their outlooks to keep up with the S&P 500’s 20% rally this year.

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BMO Capital Markets has the highest call for the US stock benchmark at 6,100, while Evercore ISI sees the gauge closing at 6,000 by year end. On the other end of the spectrum, Barry Bannister, chief equity strategist at Stifel Nicolaus & Co., warned last week that the market is in a dot-com-bubble “Groundhog Day,” and said stocks could plunge by up to 13% by the fourth quarter.

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