Barclays Lowers S&P 500 Target Amid Tariff and Growth Concerns
Barclays has lowered its S&P 500 year-end target to 5,900, marking the lowest target among major banks.
- This reduction highlights growing concerns about tariffs and economic slowdown.
- The new target suggests a modest 0.3% gain for the year.
Economic and Market Conditions Lead to Downgrade
Before the cut, Barclays had set a 6,600 target, but it revised the forecast due to deteriorating economic data and the disruptive effects of tariffs on markets this year.
- RBC and Goldman Sachs also adjusted their targets, forecasting the S&P to reach 6,200 by year-end.
- In contrast, Citi and HSBC downgraded their outlooks but maintained their targets at a neutral stance.
Tariffs Expected to Impact Earnings
Barclays expects tariffs to weigh heavily on earnings, predicting a 1.6% drop in S&P 500 earnings per share (EPS) due to higher duties from China and reciprocal tariffs.
- If retaliation tariffs are imposed by other countries, Barclays projects an additional 0.7% fall in EPS.
- The firm highlighted that tariffs on goods from China, Canada, Mexico, and the European Union are central to the disruption in trade.
Earnings Growth Could Take a Major Hit
Barclays has long warned that earnings growth is a crucial driver for the stock market.
- In December, the bank predicted that a full-scale trade war could reduce EPS by up to 2.8%.
- If tariff tensions ease or if President Trump revises policies, it could lead to a valuation recovery.
The Bear Case Scenario: S&P 500 in a Downturn
Barclays outlines a bear case where escalating tariffs could significantly harm EPS growth.
- If tariffs on Canada, Mexico, and China intensify, this could push US GDP into contraction.
- This scenario could send the S&P 500 down to 4,400, a 15% probability in Barclays’ assessment.