Will the Stock Market Crash or Soar in 2025? Wall Street Analysts Are Changing Their Forecasts.

Meanwhile, Goldman economist Jan Hatzius upwardly revised his recession probability forecast to 35%, up from 20%, which itself was up from 15%. He estimates tariffs imposed by Trump will raise the average tax on U.S. imports by 15 percentage points to 18%, the highest level in about 100 years.

In short, Wall Street has become increasingly pessimistic about how heavy-handed Trump will be with trade policy, which has led to downward revisions in U.S. economic growth forecasts. That uncertainty explains why several analysts have recently lowered their 2025 targets for the S&P 500. And more may follow in the coming weeks.

Economic uncertainty has been the defining theme of President Trump’s second term. BlackRock CEO Larry Fink wrote in his recent shareholder letter, “I hear it from nearly every client, nearly every leader — nearly every person — I talk to: They’re more anxious about the economy than any time in recent memory.”

Tariffs are the reason for that uncertainty. Bloomberg reported last month, “In a span of three days in the past week, Trump imposed 25% levies on most Canadian and Mexican goods, then promised a one-month delay on those that comply with the North American trade agreement, then threatened major new tariffs against Canadian lumber and dairy.”

President Trump has wavered back and forth on the terms and conditions of his trade policy, which has made financial planning very difficult, if not impossible, for business leaders and consumers. Is it better to stockpile inventory or limit supply purchases right now? Should you buy that new car today or wait? Your guess is as good as mine, because no one knows what U.S. trade policy will look like in a few months.

Some analysts think uncertainty has peaked since Trump has defined his reciprocal tariff plans. But other analysts (and I agree) see reciprocal tariffs as a means of drawing trading partners into a conversation, which leaves room for more uncertainty in the future. Mike Wilson at Morgan Stanley told Bloomberg:

That’s how you get people to engage in your discussion. You come out with a big splash. They have to come to the table and negotiations begin. We’re not even at the table yet.

Here is the bottom line: With President Trump whipsawing on trade policy, several analysts have cut their S&P 500 targets for 2025 because they have increasingly pessimistic views on the U.S. economy. I have no doubt the situation will eventually resolve itself — every past downturn has been a buying opportunity — but investors should be cautious in the current environment. That means limiting purchases to high-conviction stocks and building a cash position in your portfolio.

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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool recommends Barclays Plc. The Motley Fool has a disclosure policy.

Will the Stock Market Crash or Soar in 2025? Wall Street Analysts Are Changing Their Forecasts. was originally published by The Motley Fool