Stock Market Forecast: Goldman Sachs Warns of Uncertainty, Slashes S&P 500 Target

Tariff Concerns and Market Volatility Push Goldman Sachs to Cut S&P 500 Target

Wall Street has been on edge this week as renewed tariff tensions and economic uncertainty drive sharp market swings. On Monday, the S&P 500 suffered its steepest one-day drop since December, erasing $4 trillion in market value. By Tuesday, the index was briefly on track to confirm a correction before recovering. With policy risks mounting, Goldman Sachs has revised its outlook, lowering its year-end target for the index.

Why Did Goldman Sachs Cut Its S&P 500 Target?

In a note published on Monday, Goldman Sachs reduced its S&P 500 year-end target to 6,200 from 6,500. The firm cited growing policy uncertainty, particularly regarding tariffs, and concerns about slowing economic growth. The new forecast still implies a 10.6% gain from Tuesday’s closing level of 5,572.

The selloff this week has been driven largely by a sharp drop in the “Magnificent 7” tech stocks, which have fallen 14% from their recent peak. Their price-to-earnings ratio has declined from 30x to 26x, signaling investor concerns over stretched valuations.

How Big of a Risk Is a Recession?

Recession risks are rising as tariffs create new economic headwinds. On Wednesday, Pimco’s Alec Kersman said the probability of a U.S. recession in 2025 has climbed to 35%, more than double the 15% estimate from December. He pointed to the economic drag from trade restrictions as a key factor.

Despite this increased risk, Pimco still expects U.S. GDP to grow between 1% and 1.5%. Some analysts believe tariffs could even boost domestic spending, cushioning the economic impact.

Could Tariffs Actually Help the Economy?

While most analysts see tariffs as a negative, some argue they could spur consumer spending at home. Kamal Bhatia, CEO of Principal Asset Management, noted that trade barriers often trigger “patriotic” spending shifts, which could support economic growth. Since consumer spending makes up nearly two-thirds of U.S. GDP, this shift could partially offset the drag from tariffs.

What Should Traders Watch Next?

With markets still reacting to this week’s volatility, traders should prepare for more uncertainty. Key events to watch include further trade policy announcements, economic data releases, and the Federal Reserve’s stance on interest rates. Corporate earnings in the coming months will also be critical in determining whether the S&P 500 can recover from its recent losses.

More Information in our Economic Calendar.