Why Goldman's 2025 stock market downgrade is actually bullish

This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

To say that the bears are in control of the market right now is an understatement. No one is in control. Or really, no one really knows what’s going to happen, making retreat the safer option.

But for the modelers who somehow turn geopolitical skirmishes, Capitol Hill intrigue, and corporate activity into layers of assumptions, risk assessments, and, ultimately, numbers, there’s at least some clarity in declaring what might happen by December, versus trying to make sense of tomorrow’s closing bell based off what we know today.

Earlier this week, Goldman Sachs chief US equity strategist David Kostin became the first major name on Wall Street to lower their year-end price target for the S&P 500, following the gauge’s tumble into near-correction territory.

At first glance, the lowered year-end outlook looks like a pullback. The stock market will likely end the year worse off than the previous estimate, reflecting a more than 4% adjustment, as a diminished GDP outlook weighs on projected corporate profits.

The new forecast is still well above where the market stands now. And it’s higher still than the all-time peaks of February, charting an 11% gain for the year.

But can a downward revision really be all that optimistic if other forecasts still have the S&P finishing the year above 7,000? Is viewing the downshift in a positive light just a cheap sleight of hand aimed at lowering one’s expectations?

Let us make the case. The revision comes when the mood of the day is panic and trade uncertainty is peaking. And as sobering as the vibe is, the year-end figure represents some big gains. Meanwhile, when forecasters at the end of last year predicted 2025 levels, Wall Street was knee-deep in animal spirits. A judgment made during trying times carries more significance.

Or, look at the numbers alone. Kostin’s November 6,500 call at 5,900 was a 10% gain. Calling 6,200 at 5,600 is a fatter percentage.

Goldman Sachs was the first of the analyst teams we track to shrink their number, as Yahoo Finance’s Josh Schafer reported. And adding to the revision’s bullish sentiment is the fact that it acknowledges the S&P slide but still keeps the year-end figure high. It’s an updated call with the benefit of more information, even if some of that is taking myriad variables thought to be certain out of the equation.

Wednesday’s largely favorable updates on inflation and hiring also reinforce the notion that the economy is still in solid shape, despite the stock market plunge sparked by Trump’s tariffs. The immediate market concerns are about what’s coming rather than what’s currently happening, for now.

As this newsletter noted Wednesday, Wall Street may only be in the initial stage of accepting the “pain” of the White House’s bigger plan. The corporate benefits of deregulation and tax cuts will come to pass later, the administration has promised. An end-of-year prediction has the benefit of time. By then, stronger economic data may reveal itself or perhaps the topsy-turvy tariff threats will have subsided.

But even if we accept that stocks go up over the long term, is December a long enough timeline? Just because the case for a bullish 2025 has become more modest doesn’t mean it’s any more correct.

Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.

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