Stock Forecasters Increase Predictions for S&P 500 in 2025: Here's Advice Based on Past Trends
Here's the Scoop:
The mighty S&P 500 took a nose dive, plunging nearly 19% from its peak following President Donald Trump's ambitious tariff moves in April. Analysts from top Wall Street firms all agreed these tariffs would send the economy into a tailspin and dent company earnings.
As a result, they started slashing their 2025 price targets for the S&P 500, and some even guessed the index might deliver a negative return for the year. But optimism returned to Wall Street when Trump temporarily paused some of the harsher tariffs and a ruling by the U.S. Court of International Trade on May 28 hinted the President didn't have the legal grounds to impose the tariffs in the first place. However, the Federal Circuit Court of Appeals paused the ruling, setting up a legal battle over the following month.
Today, the S&P 500 is healing and at least two top analysts have partially reversed their recent price target cuts. These market swings can be tough to navigate, but history provides a clear roadmap for handling stock market turbulence. Let's take a closer look.
Tariffs Ain't Necessarily a Party Favour for Our Economy
Before we discuss the future, let's recap April's drama since, well, tariffs aren't going anywhere soon. Trump heralded April 2nd as "Liberation Day," and he boosted the economy by announcing a 10% tariff on ALL imported goods from every country! He also introduced a steep "reciprocal tariff" on imports from countries with major trade imbalances.
Trump put the tough tariffs on hold for 90 days for some bully-ball negotiation time, but the ruling from the U.S. Court of International Trade on May 28 blocked the reciprocal tariffs completely. They were brought back to life a few hours later by the Court of Appeals for the Federal Circuit, which will weigh arguments from both parties in early June. In other words, we're looking at a showdown that could even make its way to the Supreme Court.
The May 28 decision temporarily blocked the sweeping 10% tariffs as well, but even if it stands, there are other ways for the administration to enforce them using a different excuse. For example, Section 122 of the Trade Act of 1974 might give Trump the authority to slap 15% broad tariffs on all imported goods, but they'll only last for about four months.
Mr. Trump's goals with the trade levies are twofold: he wants to encourage companies to create more products here at home, and he wants other nations to lower trade barriers so U.S. businesses can easily export their goods. But don't hold your breath – it could take years for American companies to move their overseas production back to our shores. Dan Ives from Wedbush Securities thinks Apple might need ten whole years to shift iPhone manufacturing from China to the U.S., which leaves consumers hanging with higher-priced goods.
These higher prices would pull down consumer spending, affecting businesses and supply chains throughout the country. A decrease in spending has the potential to lead us straight into a recession, and that's enough to put corporate earnings in a tight spot, explaining why analysts got gloomy about the S&P 500 after April 2.
Street Smarts are Making a Comeback
Check out this list of top Wall Street firms that cut their 2025 targets for the S&P 500 due to global trade tensions:
- Oppenheimer knocked their S&P 500 target for 2025 down from 7,100 to 5,950.
- Yardeni Research sliced their target from 7,000 to 6,400, then again to 6,000.
- Goldman Sachs lowered their estimate from 6,500 to 6,200, then to 5,700.
- RBC Capital Markets reduced their forecast from 6,600 to 5,500.
- Barclays trimmed their target from 6,600 to 5,900.
- UBS cut their estimate from 6,400 to 5,800.
- HSBC slashed their target from 6,700 to 5,600.
The S&P 500 finished 2024 at 5,881, so the revised targets from Goldman Sachs, RBC Capital Markets, UBS, and HSBC implied a negative return for the index this year. But things are looking up as Trump's reciprocal tariffs are on ice, and top analysts at two firms have increased their S&P 500 targets for this year.
At the beginning of May, David Kostin and his team at Goldman Sachs lifted their three-month price target to 5,900, and their 12-month target to 6,500. Around the same time, Ed Yardeni from Yardeni Research raised his 2025 target back to 6,500, specifically citing the rollback of Trump's tariffs. The S&P 500 has already bounced back to 5,900 as of this writing, meaning it's up a massive 23% from its April low. It still needs to climb another 4% to regain its all-time high, but it's definitely pointing in the right direction.
Course and Distance: What to Do Next
The bottom line? Market sell-offs and intense volatility are part of the game. Corrections of at least 10% occur roughly every 2.5 years on average, and bear markets of 20% or more happen every six years or so. In the last 25 years, investors have weathered four bear markets, bouncing back every time.
Severe market sell-offs demand a cash investment strategy, and the price investors must pay to earn significant long-term returns. In fact, the S&P 500 has delivered an amazing compound annual return of 10.3% since its inception in 1957 – even after accounting for every correction and bear market.
The main point? Stay the course and focus on the long game. History shows a market sell-off is more likely a buying opportunity than a reason to hit the panic button. After all, the experts' ever-changing price predictions for the S&P 500 this year prove that even the experts have no idea where the stock market will go in the short run.
- In light of the S&P 500's significant drop, some investors might reconsider their finance decisions and think twice before investing in the stock-market.
- To navigate the uncertainties brought by tariff policies, understanding the intricacies of finance and the stock-market is crucial for making informed money management decisions.
- Despite the negative outlooks from analysts and the temporary negative targets for the S&P 500, the market's recent rebound shows that investing can still yield great returns, given time and market fluctuations.
