Wall Street Adjusts S&P 500 Targets Amid Trade Policy Uncertainty

In the wake of President Donald Trump’s recent trade policies, Wall Street banks have substantially revised their target projections for the S&P 500 index, reflecting growing apprehension about potential economic repercussions.

Market Reaction to Trade Developments

Over the last two weeks, at least ten major financial institutions, including JPMorgan Chase, Bank of America, and Evercore ISI, have reduced their forecasts for the S&P 500. This decision follows Trump’s announcement of a baseline duty of 10% on a broad range of US imports, which has triggered significant volatility in financial markets.

Key Performance Metrics

Since the announcement on April 2, the S&P 500 has seen a notable decline of over 7%, contributing to a total drop of 14% from its record high reached on February 19. Although the President has since suspended the reciprocal tariffs and established exemptions for certain electronics, the prevailing uncertainty continues to weigh heavily on economic growth prospects.

Analyst Perspectives on Economic Impacts

Eminent analysts, such as Scott Chronert from Citigroup, note that the optimism that characterized the beginning of the year has given way to significant uncertainty. As a result, Wall Street’s average target for the S&P 500 now sits at 6,012—down from 6,539 at the end of the previous year. In comparison, the S&P 500 closed the week at 5,283.

Despite the downward revisions and concerns about slowing economic activity, some strategists predict a resurgence for the index, with expectations of a 14% rise in the upcoming months. However, this projection reflects a stark slowdown from the robust gains seen in 2023 and 2024.

Reversal of Market Sentiment

The recent cautious stance from analysts marks a significant shift from earlier in the year, when many anticipated that tax cuts and reduced regulations under a Republican government would enhance corporate profitability.

Updated Projections and Future Outlook

For instance, Citigroup has announced a new year-end target of 5,800 for the S&P 500, a reduction from its prior estimate of 6,500, while simultaneously lowering its 2025 earnings per share projection to $255 from $270. This forecast is now marginally below the Bloomberg analytical average of $262.

Chronert expressed that the recent decline in US stock values could signify “the first bear market specifically triggered by US presidential actions.”

Predictions from Other Analysts

Other banks like JPMorgan have adjusted their “base case” target significantly, dropping it from 6,500 to 5,200, reflecting expectations of only partial relief from tariffs. They emphasized that while US Exceptionalism remains intact, the rapid policy changes have surfaced at a time when market valuations were already high and investor positioning was tight.

Peter Berezin of BCA Research, predicting an even more pessimistic outlook with the lowest target among his peers at around 4,450 for 2025, foresees significant challenges, stating that a US recession could emerge within the coming months.

Conclusion

As the market navigates this unpredictable landscape, analysts are urging caution, underscoring the importance of closely monitoring the effects of government actions on economic stability and investment performance.