Wall Street S&P 500 Forecasts Are More of a Sentiment Gauge Than a Crystal Ball, Says Strategist
Wall Street’s year-end targets for the S&P 500 are better seen as a snapshot of current market sentiment rather than reliable predictions, according to one market strategist.
The recent selloff in U.S. equities caught many Wall Street forecasters off guard, prompting a wave of downward revisions to S&P 500 targets after President Donald Trump’s shifting tariff plans rattled financial markets.
Over the past month, at least a dozen major firms — including JPMorgan, Bank of America, Goldman Sachs, and RBC Capital Markets — have lowered their expectations for the S&P 500’s performance in 2025. The catalyst: escalating trade tensions and a sweeping new tariff policy that’s reignited fears of a potential recession.
Despite the recent volatility, most strategists still anticipate a recovery in stocks by year-end — just not as strong as initially projected. The updated median year-end target now sits at 5,950, implying a gain of over 10% from Monday’s close of 5,405.97, according to a MarketWatch survey of major investment banks and research firms.
Just a few weeks ago, that target stood near 6,600. Since the White House announced a blanket 10% tariff on all imports on April 2 — along with harsher levies for certain trading partners — consensus estimates have dropped nearly 10% in less than two weeks.
At the beginning of 2025, forecasts for the S&P 500 ranged between 6,400 and 7,100. Today, projections span a much wider range: 5,200 to 7,000. Some firms, like Deutsche Bank, Wells Fargo, and Morgan Stanley, have yet to update their outlooks.
So, should investors rely on these updated predictions?
“The odds of these forecasts getting whipsawed are high — they all moved together in a herd,” said Mark Hackett, chief market strategist at Nationwide Financial. “Seeing a 10% to 11% swing in consensus in just a week is extremely rare.”
Hackett argues that S&P 500 targets are better viewed as “a temperature check” rather than dependable forecasts. Historically, they’ve been off the mark — by an average of nearly 14% annually since 2000, he noted.
Typically, strategists derive their targets by multiplying projected earnings per share for the S&P 500 by a forward price-to-earnings ratio. But this formula faces added uncertainty in today’s environment.
“The first-quarter earnings season is underway, but the impact of tariffs on corporate profits is still unknown,” said Tom Bruce, macroeconomic strategist at Tanglewood Total Wealth Management. “A 90-day pause in reciprocal tariffs offers some short-term clarity, but beyond that, it’s anyone’s guess.”
Bruce added, “Realistically, tariffs could significantly affect corporate earnings — but with so much up in the air, earnings-based projections right now are mostly educated guesses.”
Indeed, Wall Street’s 2025 earnings outlook has already softened. As of Friday, the consensus estimate for S&P 500 full-year earnings was $268.49, down from $271.05 in mid-March, according to FactSet.
On Tuesday, stocks closed lower as investors absorbed mixed earnings results from major financial firms and awaited further clarity on trade policy. The Dow fell 0.4%, the S&P 500 slipped 0.2%, and the Nasdaq ended nearly unchanged.
