The S&P 500 (^GSPC 0.67%) rocketed higher after Donald Trump won the presidential election in November. Many analysts issued optimistic forecasts for the U.S. stock market based on expectations that tax cuts and deregulation should boost economic growth.
However, the S&P 500 has lost its post-election gains and then some. Recession fears have resurfaced as President Trump has forged ahead with the aggressive changes to trade policy outlined during his campaign. The S&P 500 is currently 8% below its record high and nearly 3% below where it closed on election day.
Meanwhile, several analysts have lowered their year-end forecasts for the S&P 500, but the vast majority still expect strong returns from the benchmark index in 2025. Here are the important details.
Many on Wall Street still expect the S&P 500 to soar in 2025
The following chart shows the year-end S&P 500 target prices set by analysts at 17 Wall Street investment banks and research institutions. It also gives the implied upside and downside versus the current level of 5,633. The chart is by no means comprehensive, but it does indicate that many analysts expect the U.S. stock market to rebound in the remaining months of the year.
|
Wall Street Firm |
S&P 500 Target |
Implied Upside (Downside) |
|---|---|---|
|
Oppenheimer |
7,100 |
26% |
|
Wells Fargo |
7.007 |
24% |
|
Deutsche Bank |
7,000 |
24% |
|
Evercore |
6,800 |
21% |
|
BMO Capital |
6,700 |
19% |
|
HSBC |
6,700 |
19% |
|
Bank of America |
6,666 |
18% |
|
Fundstrat |
6,600 |
17% |
|
Citigroup |
6,500 |
15% |
|
JPMorgan |
6,500 |
15% |
|
Morgan Stanley |
6,500 |
15% |
|
UBS |
6,400 |
14% |
|
RBC Capital |
6,200 |
10% |
|
Yardeni Research |
6,100 |
8% |
|
Barclays |
5,900 |
5% |
|
Goldman Sachs |
5,700 |
1% |
|
Stifel |
5,500 |
(2%) |
|
Median |
6,500 |
15% |
Data source: Yahoo! Finance.
The median forecast says the S&P 500 will hit 6,500 by year-end, which implies 15% upside from its current level of 5,633. It also represents more than 10% upside from where the S&P 500 started the year, which was 5,882.
Importantly, the median figure shown in the preceding chart includes downward revisions from analysts at UBS, RBC Capital, Yardeni Research, Barclays, and Goldman Sachs, all of whom have lowered their year-end targets in recent weeks as their confidence in the U.S. economy has wavered in response tariffs imposed by Trump.
Goldman actually cut its outlook twice in the last month. Analysts at the investment bank initially said the S&P 500 would hit 6,500 this year, but lowered that figure to 6,200 to account for slower-than-expected economic growth. They recently lowered their outlook again for the same reason, this time to 5,700.
Meanwhile, Goldman economist Jan Hatzius upwardly revised his recession probability forecast to 35%, up from 20%, which itself was up from 15%. He estimates tariffs imposed by Trump will raise the average tax on U.S. imports by 15 percentage points to 18%, the highest level in about 100 years.
In short, Wall Street has become increasingly pessimistic about how heavy-handed Trump will be with trade policy, which has led to downward revisions in U.S. economic growth forecasts. That uncertainty explains why several analysts have recently lowered their 2025 targets for the S&P 500. And more may follow in the coming weeks.
Image source: Getty Images.
Investors should be cautious in the current market environment
Economic uncertainty has been the defining theme of President Trump’s second term. BlackRock CEO Larry Fink wrote in his recent shareholder letter, “I hear it from nearly every client, nearly every leader — nearly every person — I talk to: They’re more anxious about the economy than any time in recent memory.”
Tariffs are the reason for that uncertainty. Bloomberg reported last month, “In a span of three days in the past week, Trump imposed 25% levies on most Canadian and Mexican goods, then promised a one-month delay on those that comply with the North American trade agreement, then threatened major new tariffs against Canadian lumber and dairy.”
President Trump has wavered back and forth on the terms and conditions of his trade policy, which has made financial planning very difficult, if not impossible, for business leaders and consumers. Is it better to stockpile inventory or limit supply purchases right now? Should you buy that new car today or wait? Your guess is as good as mine, because no one knows what U.S. trade policy will look like in a few months.
Some analysts think uncertainty has peaked since Trump has defined his reciprocal tariff plans. But other analysts (and I agree) see reciprocal tariffs as a means of drawing trading partners into a conversation, which leaves room for more uncertainty in the future. Mike Wilson at Morgan Stanley told Bloomberg:
That’s how you get people to engage in your discussion. You come out with a big splash. They have to come to the table and negotiations begin. We’re not even at the table yet.
Here is the bottom line: With President Trump whipsawing on trade policy, several analysts have cut their S&P 500 targets for 2025 because they have increasingly pessimistic views on the U.S. economy. I have no doubt the situation will eventually resolve itself — every past downturn has been a buying opportunity — but investors should be cautious in the current environment. That means limiting purchases to high-conviction stocks and building a cash position in your portfolio.
