Goldman Sachs Lowers S&P 500 Year-End Forecast to 6,200 Amid Economic Uncertainty
Goldman Sachs has revised its 2025 year-end target for the S&P 500 Index down to 6,200 from 6,500, citing rising policy uncertainty, particularly regarding tariffs, and concerns over economic growth.
Despite the downgrade, the new target remains 10.6% above the index’s most recent closing level of 5,572.07.
The revision comes after a period of heightened market volatility. On Monday, the S&P 500 experienced its steepest one-day drop since December 18, erasing approximately $4 trillion in market value from its recent peak. The index briefly approached correction territory on Tuesday following President Donald Trump’s announcement of new tariffs on Canada—a move he later walked back.
Goldman Sachs analysts attributed the market’s sharp downturn to increased policy uncertainty, economic growth concerns, and shifts in investor positioning, particularly among hedge funds. They noted that the recent market decline has been largely driven by a 14% drop in the “Magnificent 7” tech stocks, with their average price-to-earnings ratio falling from 30x to 26x.
The bank’s strategists, including David Kostin and Jenny Ma, pointed to a revised US GDP growth forecast of 1.7% for 2025, down from earlier projections of 2.4%. The downgrade reflects expectations of higher tariffs and increased uncertainty, which typically leads to a higher equity risk premium.
Goldman Sachs is not alone in its cautious outlook. Other major banks, including Citigroup, HSBC, JPMorgan Chase, and RBC Capital Markets, have also scaled back their bullish calls for 2025, citing concerns over trade policies and geopolitical risks.
Trump’s on-and-off trade policies and government job cuts have contributed to falling consumer and business confidence, leading to a 9% decline in the S&P 500 from its February high. Meanwhile, the Nasdaq 100 recently entered correction territory, reflecting investor caution.
Goldman Sachs has adjusted its earnings growth forecast for the S&P 500 to 7%, down from 9%, while also reducing its price-to-earnings ratio assumption by 4%. The bank recommended that investors focus on stocks less exposed to tariff-related volatility, including Bank of New York Mellon Corp., S&P Global Inc., and Moody’s Corp.
Additionally, Goldman Sachs identified opportunities in stocks that have been negatively impacted by hedge fund repositioning and are now trading at attractive valuations. These include Informatica Inc. and Spotify Technology SA.
Goldman Sachs Chief Economist Jan Hatzius warned that tariffs could slow economic growth by reducing consumer spending power and discouraging business investment. He now projects a 10-percentage-point increase in the average US tariff rate this year, double his previous forecast.
Trump recently announced a 25% tariff on Canadian steel and aluminum, set to take effect Wednesday. This policy shift could lead to higher costs for US manufacturers and is part of a broader tariff strategy affecting $1.4 trillion worth of goods from Canada, Mexico, and China. Some of these tariffs have been temporarily paused until April.
Hatzius estimates that tariffs could reduce US GDP growth by 0.8 percentage points over the next year, with potential tax cuts and deregulation offsetting only 0.1 to 0.2 percentage points of this impact.
There are also inflation concerns, as Hatzius expects the core Personal Consumption Expenditure (PCE) price index to rise to 3% later this year, an upward revision of 0.5 percentage points from his prior forecast. He cautioned that if inflation expectations become unanchored, it could create further economic instability.
Goldman Sachs’ downward revision adds to a growing sense of caution among economists and investors. JPMorgan Chase analysts now see a 40% probability of a recession in the second half of 2025, while other market watchers have pointed to weakening consumer sentiment and the impact of trade uncertainty on corporate decision-making.
While Trump’s policies initially fueled optimism in markets—particularly regarding deregulation and tax cuts—the recent tariff announcements have erased much of the post-election rally. So far this year, the S&P 500 is down 5.1%, while the Nasdaq has fallen 9.7%, with economically sensitive sectors such as consumer discretionary and financials taking significant hits.
