Goldman Sachs has taken action reflecting the current climate on Wall Street by lowering its year-end S&P 500 target from 6,500 to 6,200. This adjustment signals the bank's response to growing concerns over market volatility and economic uncertainty.
On March 12, 2025, Goldman Sachs rated its target at 6,200, illustrating expectations for modest future gains. The new projection indicates just about a 5% increase for the S&P 500 throughout this year, highlighting the unease pervading the financial industry. The bank's latest projection marks it as the first among major financial institutions to cut their forecast for 2025.
Over the past month, the S&P 500 index has seen significant stress, plunging nearly 8% and falling more than 9% below its record high from February. Such downward movement brings the index close to correction territory, which is defined as being at least 10% below recent high points.
Leading the downward trend is the group commonly referred to as the "Magnificent Seven"—comprised of tech giants Nvidia, Meta Platforms, Amazon, Apple, Alphabet, Tesla, and Microsoft. Markedly, Nvidia's shares have dropped nearly 13% recently, and Tesla’s value has decreased by as much as 21%. The underperformance of these high-flying stocks has been described by Goldman’s chief U.S. equity strategist David Kostin as transforming the Magnificent Seven from the "Magnificent 7" to the "Maleficent 7."
“During the past three weeks, the S&P 500 index has plummeted by 9% from its all-time high with more than half of the near-correction stemming from a 14% plunge in the share prices of the Mag 7 stocks,” remarked Kostin. Notably, this is in stark juxtaposition to the previous year when the same group accounted for over half of the total 25% return achieved by the overall index.
The market decline has been primarily attributed to increasing policy uncertainties, especially those connected to tariffs, alongside worries about the broader growth outlook. "The proximate causes of the market decline are the jump in policy uncertainty largely related to tariffs, concerns about the economic growth outlook, and a positioning unwind, especially among hedge funds," added Kostin.
Compounding the market unrest were the events of March 10, when the S&P 500 recorded its steepest one-day drop since December, wiping out approximately $4 trillion in market value. On the following day, the index appeared on track for correction before experiencing some recovery.
With these economic pressures piling up, analysts are adjusting their expectations for the U.S. economy moving forward. On March 12, Alec Kersman from Pimco noted the probability of the U.S. entering recession by 2025 has spiked to 35%, significantly higher than the 15% estimation made just months ago. This anticipated recession risk has stemmed from the economic drag imposed by trade restrictions, particularly due to tariffs.
Despite the substantial risks presented by tariffs, some pundits speculate they might inadvertently spark increased domestic consumption, thereby softening their economic impact. Kamal Bhatia, CEO of Principal Asset Management, shared insights on how these trade barriers might prompt "patriotic" spending behaviors as consumers pivot to support local businesses. With consumer spending accounting for nearly two-thirds of U.S. GDP, any surge could feasibly help alleviate the economic toll of implemented tariffs.
Looking forward, analysts are urging traders to brace for continued market instability. Key indicators to monitor include future trade policy statements, upcoming economic data releases, and the Federal Reserve's position on interest rates. Corporate earnings reports over the forthcoming months will also be pivotal in assessing whether the S&P 500 can rebound from its recent downtrend.
Goldman Sachs' reduced forecast reflects broader trends visible across financial markets, and their insights may guide investors toward where to strategically place their capital to weather the turbulent conditions. They recommend focusing on stocks resilient against these primary thematic pressures, such as Bank of New York Mellon, HP Inc., and Gilead Sciences. Additional opportunities include their curated group of stable growth stocks, featuring brands like Domino's Pizza, Waste Management, and Home Depot.
Will the S&P 500 regain its footing, or are traders facing more hardship? Investors are left to navigate this challenging environment as they await the next wave of economic reporting and analysis.