Many Wall Street strategists are lowering their year-end S&P 500 targets due to economic concerns. The stock recently had a major decrease of a whopping 10% leaving potential investors less optimistic about their returns.
Wall Street Strategist Lowers Year-End Goal for S&P 500
The S&P 500, or the Standards & Poor’s 500, is a stock market index representing the top 500 domestic companies. The total valuation of one stock of each of those companies is about $5,700. Investors invest in this index in order to have a safe return. Each year, experts will predict how much growth will occur within the index based on current market conditions. For example, Lori Calvasina, head of US equity strategy at RBC lowered her year-end target 6,600 to 6,200. This means she expects the S&P 500’s total valuation to be $6,200 instead of $6,600 by year-end.
Decrease in Expected Economic Growth
Speaking on this topic, Calvasina said “While we don’t believe that a pullback beyond the 10% drawdown that has already been sustained is inevitable, we do believe that the path for stocks between now and December has gotten rockier with stronger headwinds.” RBC economic experts predict the economy will grow at 1.6%, lower than their previous estimate of 2%. Calvasina said that when GDP grows by 1.1%-2%, the stock market typically falls.
She said “Some economic forecasters around the Street have started to dial down their 2025 GDP forecasts, but are not calling for a recession. Historically, the dialing down of economic growth on its own presents a significant headwind for the stock market to overcome.” Calvasina was also asked about why the stock market has been hit hard. She said “The vibes have helped us understand why the stock market has been getting hit so hard, and why concerns about the direction of the economy are rising. But the vibes aren’t sending us a clear signal about whether, even with the S&P 500 down 10% from all time highs, a contrarian buying opportunity is at hand.”
But it’s not just Calvasina who believes this. David Kostin, chief US equity strategist at Goldman Sachs decreased their prediction to 6,200 points from 6,500. Of this, Kostin said “Our revised estimates reflect the recently reduced GDP growth forecast of our US Economics team, a higher assumed tariff rate, and higher level of uncertainty that is typically associated with a greater equity risk premium.”
Featured Image Credit: Yan Krukau; Pexels: Thank You!
