Wall Street strategists keep moving their year-end targets for the S&P 500 (^GSPC) lower as President Trump’s tariffs become a reality.
On Sunday, both Yardeni Research and Goldman Sachs lowered their year-end targets for the second time in the past month. Yardeni Research now sees the S&P 500 hitting 6,100 this year, below a prior forecast for 6,400. Meanwhile, Goldman Sachs projects the benchmark index will end the year at 5,700, down from its previous forecast of 6,200.
“These estimates incorporate downward revisions to both earnings growth and valuations, reflecting a weaker base case economic growth backdrop, higher uncertainty, and higher recession risk,” Goldman Sachs chief US equity strategist David Kostin wrote.
Key to both projections is an admission that Trump’s tariffs are likely to be more widespread than most economists initially thought and that they will weigh on the overall economy and potentially provide further near-term downside to stocks.
Goldman Sachs now has a three-month target on the S&P 500 of 5,300. Key to Goldman’s call was a bleaker outlook for the US economy. Goldman’s team of economists recently raised their tariff assumptions to a 15% tariff rate, above their prior forecast of 10%, and raised its probability of a recession in the next 12 months to 35% from 20% seen previously.
Read more: What Trump’s tariffs mean for the economy and your wallet
Goldman’s baseline forecast is for the S&P 500 to bottom “this summer, slightly ahead of the trough in economic growth in our forecasts.”
“We continue to recommend investors watch for an improvement in the growth outlook, more asymmetry in market pricing, or depressed positioning before trying to trade a market bottom,” Kostin wrote.
Meanwhile, Yardeni Research president Ed Yardeni now sees a 45% chance the economy tips into recession and the S&P 500 enters a bear market as market conditions “have continued to deteriorate under Trump’s Reign of Tariffs.” A bear market would mark a 20% decline for the benchmark from its recent all-time high to a level of just over 4,900. This would mean stocks could have at least another 12% in downside from current levels.
Yardeni wrote he’s “losing confidence” that the US economy will remain resilient in the face of “Trump’s reign of tariffs.” Yardeni pointed to the already growing signs that stagflation, a period where inflation remains sticky while economic growth slows, is already showing up in economic data. On Friday, a fresh release from the Bureau of Economic Analysis showed that consumer spending increased less than expected in March while inflation increased more than expected.
