Goldman and BofA lift forecasts as investors shrug off tariffs
Wall Street strategists are growing more optimistic on U.S. equities, even as fresh trade tensions resurface. Goldman Sachs lifted its year-end target for the S&P 500 to 6,600 from 6,100 on Monday, citing expectations of deeper Federal Reserve rate cuts, falling bond yields, and market resilience despite softer earnings guidance.
Bank of America followed with its own upward revision, increasing its S&P 500 target to 6,300, up from 5,600. While that reflects only a 1.1% gain from current levels, BofA strategist Savita Subramanian acknowledged the move was necessary to “catch up” with the market’s recent surge. Still, she warned the third quarter could lack strong catalysts to sustain the rally.
Tariff threats return, but markets stay focused on rates
President Trump reignited global trade fears this week with threats of 25% tariffs on imports from Japan and South Korea. The announcement contributed to a broad market decline on Monday. However, the administration also delayed its tariff deadline to August 1, giving markets a reason to believe negotiations remain ongoing.
“It’s the art of the deal playing out in real time,” said Adam Johnson of Bullseye American Ingenuity Fund. “We scare everyone, then delay, hoping for better terms.” Johnson called the market’s confidence in a tariff walk-back part of the “TACO trade”—short for “Trump Always Chickens Out.”
This belief in last-minute reversals has underpinned market strength, especially since April’s initial “Liberation Day” tariff threats. Since then, stocks have staged a strong rebound, driven by investor confidence that trade policy shifts are more bark than bite.
Uncertainty remains around earnings and macro signals
Still, analysts caution that ongoing uncertainty could disrupt earnings forecasts. Goldman strategist David Kostin said the biggest risk to their EPS projections is the ultimate scope and impact of Trump’s tariff plan. While their 2025 estimates are in line with consensus, their 2026 outlook remains more conservative due to possible profit pressure.
Mixed economic indicators further complicate the picture. Recent data show a downward revision to Q1 GDP, an uptick in core PCE inflation, and jobless claims at their highest since 2021—signs that point to potential economic strain ahead.
“There are some yellow flags in the economy but no clear red flags yet,” said Aditya Bhave, senior U.S. economist at Bank of America. “We’re at a fork in the road. If something is going to break, it’s going to break soon.”
For now, Wall Street appears willing to look past short-term trade noise, betting instead on dovish Fed policy and resilient consumer behavior to keep stocks climbing—even with geopolitical friction in the background.
