Jamie Spencer
A nearly 10% decline in the S&P 500 (^GSPC) has led Wall Street strategists to revaluate their bullish outlooks for 2025.
Goldman Sachs Lowers S&P 500 Target
On Tuesday night, Goldman Sachs’ chief U.S. equity strategist David Kostin became the first major analyst to cut his year-end price target for the S&P 500. Kostin lowered his target from 6,500 to 6,200, citing weaker economic projections and heightened market uncertainty.
“We lower our 2025 year-end S&P 500 index target to 6200 (from 6500) to reflect a 4% reduction in our modeled fair-value forward P/E multiple (20.6x from 21.5x),” Kostin and his team wrote.
“Our new index target suggests an 11% price gain during the balance of the year, similar to our return estimate at the start of the year but from a lower starting point.”
Economic Growth Concerns
Fears surrounding the U.S. economy and President Donald Trump’s evolving tariff policy have rattled investor confidence. The S&P 500 was on the verge of entering correction territory earlier this week, triggering a wave of concern.
Goldman Sachs’ economics team recently revised its 2025 GDP growth forecast downward to 1.7% from 2.2%, citing the impact of tariffs and political uncertainty. Kostin highlighted this downgrade, adjusting his firm’s S&P 500 earnings growth estimate to 7% from 9%.
“Our revised estimates reflect the recently reduced GDP growth forecast of our U.S. Economics team, a higher assumed tariff rate, and higher level of uncertainty that is typically associated with a greater equity risk premium,” Kostin wrote. “Weaker economic activity usually means weaker corporate earnings growth.”
Market Catalysts Needed
Kostin pointed to the need for an economic growth catalyst—whether through stronger-than-expected economic data or a rollback of tariff policies—that could drive a stock market rebound. On Wednesday, U.S. markets opened higher following a softer-than-expected inflation report, hinting at potential relief for investors.
Broader Market Outlook
Other Wall Street strategists echoed Kostin’s concerns. Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets, warned of further potential declines, writing, “We have seen the U.S. equity market on a rocky path higher through year-end, and have believed that our 6,600 can absorb a 5-10% drawdown.”
“The risks of a drawdown of more than 10% have admittedly grown, however. If that occurs, we see a ‘growth scare’ of a 14-20% decline from peak as most likely, which could shift us into our bear case.”
Looking Ahead
While recent market movements have increased concerns, analysts will closely monitor economic data and trade policy developments in the coming months. Investors remain cautious, awaiting clearer signals on the trajectory of both the economy and stock market.
