Things have been moving so fast lately that analysts can barely keep up.
At the start of the year, hopes were high. Investors were betting on Fed rate cuts, sweeping tax breaks, and the kind of deregulation Donald Trump had promised on the campaign trail. Against this backdrop, JPMorgan and Goldman Sachs predicted the S&P 500 would climb to 6,500 by the end of 2025. Morgan Stanley was even more bullish, forecasting 7,400 in a best-case scenario.
But that optimism ran into a brick wall on April 2 when the President moved from talk to action, slapping tariffs on goods from 211 countries and territories. Markets deflated almost instantly, and the same banks scrambled to revise their forecasts.
Goldman Sachs, for example, went from painting a rosy picture of the future to warning of the risk of a full-blown bear market.
JPMorgan cut its baseline target for the S&P 500 to 5,200 and, at worst, saw it fall to 4,000 points. RBC lowered its year-end forecast from 6,200 to 5,500. Wells Fargo cut its estimate from 6,600 to 6,000 points. BofA now forecasts 5,600. Even BlackRock has downgraded U.S. equities to “neutral”.
Fast forward to June, and here comes another twist. Pessimism is giving way to optimism, with headlines like, “If US-China talks go well, analysts believe the S&P 500 could hit new highs.” Citi has already raised its year-end target to 6,300.
The bottom line? Relying on these forecasts is like trying to kayak across the ocean: good luck if the weather changes. Forecasting a year ahead seems more like guesswork than guidance in such an unpredictable world.
So, will the S&P 500 reach a new all-time high soon?
For that to happen, one big hurdle must be cleared: uncertainty. And it's not just trade tensions: investors are also waiting for clarity on the Federal Reserve's next move. The latest data from the New York Fed shows that inflation expectations have cooled across the board, raising renewed hopes for rate cuts. However, the Fed may wait longer to ensure the trade conflict does not reignite inflation.
Another hot topic will be second-quarter results. Investors will be watching closely, and confidence could take a hit if results disappoint or companies issue pessimistic forecasts. It is worth noting that expectations have already been lowered: S&P 500 companies are now forecast to post year-over-year earnings growth of just 4.9%, down from 9.3% on March 31. If this holds, it would mark the slowest pace since the fourth quarter of 2023, when growth was 4.0%.
That said, companies have consistently outperformed forecasts in recent quarters. If this pattern holds, and macroeconomic risks are kept in check, the upturn could still have room to run.