- Deutsche Bank AG (DB) strategists, led by Bankim Chadha, cut their S&P 500 (^GSPC) year-end target by 12% to 6,150, projecting only a 14% upside from the current 5,375 level.
- The team forecasts a 5% decline in S&P 500 earnings for 2025, reducing their EPS estimate from $282 to $240, driven by tariffs raising the effective import rate from 2.3% to 26.4%, equivalent to an $800 billion tax increase.
- Near-term S&P 500 trading is expected between 4,600 and 5,600, with low equity positioning suggesting potential relief rallies amid ongoing trade policy challenges and a 9% year-to-date index decline.
Wall Street’s optimism for U.S. equities has dimmed, with Deutsche Bank AG (DB) strategists, led by Bankim Chadha, cutting their year-end S&P 500 (^GSPC) target by 12% to 6,150, signaling a tempered outlook amid aggressive trade policies, according to a Bloomberg report. This revised target, down from one of the most bullish forecasts, implies a 14% upside from Wednesday’s close but only a recovery of losses since the index’s February peak, with the S&P 500 currently at 5,375, down nearly 9% for the year. The strategists project a 5% decline in S&P 500 earnings for 2025, a stark contrast to the consensus expectation of 8% growth, lowering their earnings per share estimate from $282 to $240 due to the disproportionate impact of tariffs on U.S. companies.
Bloomberg highlights that President Donald Trump’s trade policies, particularly newly revised tariff rates, are expected to raise the effective rate on goods imports from 2.3% to 26.4%, equivalent to an $800 billion tax increase—surpassing the $500 billion in U.S. federal corporate tax revenue for 2024. This tariff burden is seen as a key driver of weakened corporate confidence, with U.S. equities feeling the strain despite a brief relief rally following initial trade policy announcements.
Analysts are increasingly pessimistic about profit outlooks, as earnings revisions breadth nears downside extremes, reflecting fears of an economic slowdown. Deutsche Bank’s team anticipates the S&P 500 will fluctuate between 4,600 and 5,600 in the near term, noting that low equity positioning could spark relief rallies if positive news emerges. The tariff-driven challenges underscore a broader recalibration of market expectations, with U.S. companies facing heightened costs that threaten profitability. As trade tensions reshape the economic landscape, the S&P 500’s path forward hinges on navigating these pressures, with Deutsche Bank’s downgraded forecast reflecting a cautious stance on the market’s ability to deliver substantial gains in 2025.
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