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Three Wall Street strategy teams have revised their S&P 500 (^GSPC) projections in light of the recent market downturn.
The revisions share a common theme. Economic growth forecasts are being downgraded as uncertainties surrounding President Trump’s policy plans take their toll. This development stands in stark contrast to the optimistic expectations that predicted another year of robust economic growth for the US.
On a broader scale, there has been a shift in sentiment, with strategists suggesting that markets may no longer operate at the elevated valuations seen over the previous two years, making substantial gains in the S&P 500 less likely. Additionally, any potential stock rally would begin from a lower baseline, limiting the magnitude of the recovery needed to meet previous targets.
Nonetheless, 16 out of the 17 strategists we follow at Yahoo Finance project a rally for the benchmark index from this point onward.
As demonstrated in the chart below, the prevailing sentiment indicates a lack of clear consensus, though there’s a general belief that stocks will trend upward to some extent.
With forecasts suggesting an upside range between 6,200 and 7,100, analysts predict the S&P 500 could rally anywhere from approximately 10% to over 26%.
Overall, strategists anticipate that the current caution within the stock market will persist until further clarity regarding President Trump’s policies is provided. The degree of stock recovery beyond that point is likely to depend on the economic outlook and corporate profit projections.
In a recent research note, Deutsche Bank’s chief strategist Bankim Chadha indicated that if the negative sentiment surrounding the president’s tariff strategies leads to a “credible resolution plan for tariff uncertainty,” it could enable the business cycle to progress.
If that occurs, Chadha foresees the S&P 500 possibly reaching 7,000 this year.
Conversely, other strategists are beginning to suggest that the road ahead might be less straightforward.
“While we don’t foresee a pullback exceeding the 10% decline we’ve already experienced, we do believe that the path for stocks between now and December has become more challenging, facing stronger headwinds,” RBC Capital Markets’ Lori Calvasina mentioned in a recent note where she adjusted her year-end S&P 500 target from 6,600 to 6,200.
Last week, Citi equity strategist Scott Chronert discussed a “shift in sentiment” among investors over the past few months, as more clients are inquiring about the likelihood of the S&P 500 dropping to their “bear case” scenario of 5,500. This marks a significant change from the past two years, when the dominant question was whether strategists had been overly optimistic.
