Goldman Sachs turned out to be the first marquee investment house to slash its target for the 500-stock US benchmark--the S&P500 after the recent market rout. The S&P 500 briefly slipped into correction territory in the last session, however, it managed to recover soon after.
Nonetheless, the persisting concerns around trade tensions and the adverse impact of Trump's tariff plans on the US economy have been a persisting overhang for US equities. With that, Goldman Sachs slashed its 2025 target for the S&P 500 to 6,200, down from the earlier 6,500.
Alongside that, Goldman Sachs also lowered its S&P 500 earnings-per-share estimate for 2025 to $262 from $268, below Wall Street’s $270 consensus. This revision came after a downward revision in GDP expectations due to a projected 10-percentage-point tariff-rate increase. Every five-percentage-point tariff hike typically reduces S&P 500 earnings by 1 to 2 percent.
Beyond earnings, Goldman also trimmed its valuation multiple to 20.6 times projected earnings from 21.5, citing elevated uncertainty and tightening fiscal conditions. While the impact of uncertainty on valuations is usually short-lived, slower growth could sustain lower valuations for a longer period.
However, the revised estimates also assumes an eventual market recovery, projecting the S&P 500 at 6,200, which is 11 percent higher than the previous close. However, the firm did caution that the index would need either a catalyst for stronger economic growth or a clear upside opportunity before reversing the recent downturn.
The firm's analysis suggests the market is pricing in even weaker growth than Goldman’s already below-consensus forecast. The biggest risk ahead remains a significant worsening in the economic outlook, which could extend market losses further.
Now while Goldman Sachs was the first to go ahead and cut its S&P 500 target, others like Citi had recently downgraded its rating for US equities to a 'neutral'. Much like Goldman Sachs, Citi also based its decision on recession fears and weakening economic momentum.
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