A growing sense of caution is sweeping through Wall Street, with Barclays becoming the latest major bank to temper its expectations for the stock market following a volatile start to the year.
Concerns about tariffs, weakening economic data, and the increasing possibility of a recession are prompting analysts to reassess their outlook for 2025.
Barclays strategist Venu Krishna slashed his 2025 S&P 500 (^GSPC) price target to 5,900 from a previous estimate of 6,600, citing the potential impact of tariffs and what he described as “deteriorating” economic data.
The S&P 500 currently trades around 5,822, down approximately 2.3% year to date.
The investment bank’s revised forecast reflects an expectation that S&P 500 companies will face reduced earnings due in large part to tariffs imposed by the Trump administration.
Krishna cut his views on the economically sensitive Consumer Discretionary and Industrials sectors to Negative from Neutral.
Krishna wrote:
We think it will be tough for stocks to work versus deteriorating consumer sentiment, lower growth, higher inflation and tariffs. Industrials look expensive versus history and are exposed to both trade policy and tenuous manufacturing PMI amid factories front-running tariffs and government contract cancellations.
Amidst the broader caution, Barclays identified a potential bright spot, upgrading its outlook on Financials to Positive from Neutral.
The firm anticipates that the financial sector could benefit from deregulation once the uncertainties surrounding tariffs are resolved.
Joining the chorus: Wall Street’s growing concerns
Barclays’ decision to lower its S&P 500 price target follows a similar move by Goldman Sachs earlier this month, signaling a broader shift in sentiment on Wall Street.
This increased caution comes as economic anxieties continue to rise.
JPMorgan strategist Bruce Kasman raised eyebrows last week by calling out a 40% recession probability for this year.
That is the second-highest on Wall Street. Goldman Sachs’ chief economist Jan Hatzius said he thinks the market will be negatively surprised by tariffs should they go into effect on April 2 as the Trump administration suggested.
The wobbly economy also continues to play out in the data.
The weak data shows spending at US retailers last month was much weaker than expected, per the latest retail sales report.
Big companies Delta (DAL), FedEx (FDX), and Nike (NKE) have warned on near-term demand trends this month.
“We have to be realistic,” former director of the National Economic Council and current IBM vice chair Gary Cohn said on the Opening Bid podcast.
Gary Cohn, a former director of the National Economic Council said:
Ambiguity is the No. 1 enemy of a market. When a company creates ambiguity in their earnings profile, in their growth profile, in their business model, the market will punish that stock. When politicians, legislators create ambiguity in the way that taxes are going to work, the way that capital gains are going to work, the way that they’re going impose tariffs, they create ambiguity to a market and the market as a whole reprices.
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