Wall Street bulls continue to get more bearish
Deutsche Bank chief global strategist Bankhim Chadha cut his S&P 500 (^GSPC) year-end target to 6,150 from a prior forecast of 7,000, which had been among the most bullish on Wall Street entering the year. The new target reflects about 14% upside from current levels.
Chadha is now the 11th strategist tracked by Yahoo Finance to cut an S&P 500 target amid President Trump’s tariff escalation.
Chadha sees various scenarios resulting from Trump’s tariffs that could hit S&P 500 earnings in 2025, leading to his less optimistic forecast for the benchmark index. Tariffs could send prices higher and weigh on demand. There could also be less trade with China, and slowing economic activity. All in all, the headwinds would send S&P 500 earnings per share down to $240 from a prior forecast of $282, he said.
“If the tariffs are sustained, the negative impacts for S&P 500 companies’ earnings is very large,” Chadha wrote.
For now, Chadha sees the S&P 500 trading within a range of 4,600 to 5,600, with the low end of that range realized if recession fears rise. Eventually though, Chadha thinks stocks can rally if Trump backs off his harsh trade policy stance. And to Chadha, this likely happens if the decline in consumer sentiment data is realized in the president’s approval rating.
“After the initial honeymoon period, approval ratings tend to align with what is happening in the economy and particularly with consumer confidence,” Chadha wrote. “Approval ratings have been falling but very slowly as growth has remained solid and inflation has not picked up yet.”
Eventually Chadha thinks the souring outlook on the economy that has shown up in consumer sentiment survey will appear in hard economic growth data, sending Trump’s approval rating to a low enough level that he’ll back down from his more aggressive trade policy stance.
“A durable rally needs a credible relent, which in turn likely needs a substantial decline in Presidential approval ratings,” Chadha wrote.
Chadha added that the longer it takes for that to happen, the higher the risk is that a rally won’t come to fruition.
“The risk to our view is we don’t get a relent before the nonlinearities of recession kick in,” Chada wrote.
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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