Goldman Sachs lowers S&P 500 forecast as tariffs and economic slowdown weigh on markets
Goldman Sachs has cut its year-end target for the S&P 500 to 6,200 from 6,500, citing a weaker U.S. economic outlook and heightened market uncertainty linked to President Donald Trump’s tariff policies. The revised projection comes after a nearly 10% decline in the benchmark index from its February peak, with Goldman’s Chief U.S. Equity Strategist David Kostin warning that slower growth and rising economic risks are weighing on corporate earnings expectations.
The bank’s economists recently lowered their 2025 U.S. GDP growth forecast to 1.7%, down from 2.2%, reflecting the impact of tariffs and political uncertainty. This led Kostin’s team to reduce their estimated S&P 500 earnings growth for the year from 9% to 7%. “Weaker economic activity usually means weaker corporate earnings growth,” Kostin noted.
The sell-off in U.S. stocks has been driven in part by steep declines in the so-called “Magnificent Seven” tech giants, which have collectively fallen about 14% over the past three weeks. Goldman analysts have dubbed them the “Maleficent Seven” due to their recent struggles. Excluding these stocks, the broader S&P 500 has dropped just 1% over the same period.
Beyond equities, Goldman also adjusted its outlook for U.S. credit markets, warning that higher tariffs and market volatility are pushing up corporate borrowing costs. The bank now expects investment-grade bond spreads to widen to 125 basis points in the third quarter, up from an earlier forecast of 84 basis points. High-yield debt spreads are expected to hit 440 basis points, a significant increase from previous estimates.
Despite the recent turbulence, Goldman maintains that an improved economic growth outlook—whether through stronger economic data or a shift in tariff policy—could help markets recover. Wednesday’s softer-than-expected inflation report provided a brief rally in major indexes, but analysts caution that ongoing policy uncertainty could continue to weigh on investor sentiment.
Meanwhile, European markets have outperformed the U.S., with the Stoxx Europe 600 index on track for its strongest quarterly performance against the S&P 500 in dollar terms. Goldman has raised its European earnings forecasts, citing a more supportive fiscal environment and resilient credit markets.
With market volatility persisting, strategists at Citigroup, HSBC, and Morgan Stanley have also taken a more cautious stance on U.S. equities, signaling a shift in Wall Street sentiment as economic risks mount.
Post Views: 40