- Goldman Sachs’ (GS) David Kostin lowered the 2025 S&P 500 (^GSPC) year-end target to 6,200 from 6,500 after a nearly 10% index drop, citing a 4% P/E multiple reduction to 20.6x from 21.5x amid economic and tariff concerns.
- The revised target still projects an 11% price gain for the year, but from a lower base, with GDP growth cut to 1.7% from 2.2% and S&P 500 earnings growth trimmed to 7% from 9% due to weaker activity and uncertainty.
- A softer-than-expected inflation report on Wednesday lifted stocks, hinting at a potential recovery if economic data strengthens or tariff policies soften, though risks persist after the S&P 500 neared correction territory.
The S&P 500’s (^GSPC) nearly 10% tumble from its record closing high of 6,144 on Feb. 19-has shaken Wall Street, prompting Goldman Sachs’ (GS) chief U.S. equity strategist David Kostin to slash his 2025 year-end target for the index to 6,200 from 6,500, reflecting a more cautious outlook amid economic and policy concerns. This adjustment, detailed late Tuesday, stems from a 4% cut in Goldman’s fair-value forward P/E multiple to 20.6x from 21.5x, driven by a revised GDP growth forecast of 1.7% for 2025 – down from 2.2% – as Trump’s tariff uncertainties and a weaker economy ripple through projections. Despite the lower target, Kostin still anticipates an 11% price gain for the S&P 500 through year-end, a return in line with his initial yearly estimate but starting from a diminished base after the recent drop.
Investor confidence took a hit earlier this week as the S&P 500 teetered on the edge of correction territory, fueled by fears over U.S. economic health and tariff-related ambiguity, which Kostin ties to a higher equity risk premium and a reduced earnings growth estimate of 7% for the index, down from 9%. Goldman’s team highlights that slower economic activity typically drags corporate earnings lower, a reality underscored by their updated forecasts incorporating elevated tariff assumptions and broader uncertainty. Yet, Kostin sees potential for a rebound—stronger economic data or a clearer, less aggressive tariff policy could lift stocks, a possibility hinted at Wednesday when a milder-than-expected inflation report spurred gains in major indexes at the market open.
It’s obvious that the S&P 500’s trajectory hinges on these shifting dynamics, with Goldman’s revised 6,200 target signaling tempered optimism amid a challenging landscape. The nearly 10% decline has forced strategists to recalibrate, balancing the promise of an 11% recovery against risks tied to a 1.7% GDP outlook and a 7% earnings growth projection. Kostin’s note reflects a pragmatic stance—while the downgrade from 6,500 acknowledges headwinds, the focus on potential catalysts like better data or policy clarity suggests the market could still find footing if conditions improve. For now, Wall Street watches closely, weighing a leaner economic forecast against flickers of hope in the latest inflation numbers.
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