Goldman's Kostin slashes S&P 500 outlook again

by Sagarika Jaisinghani

Wall Street forecasters are sounding the alarm on US equities just days before US President Donald Trump’s tariff deadline, with Goldman Sachs Group Inc.’s David Kostin cutting his S&P 500 target for a second time this month.

The strategist now expects the benchmark to end the year around 5,700 points versus his previous estimate of 6,200, citing a higher recession risk and tariff-related uncertainty. The new target implies gains of just 2% from Friday’s close, and is among the lowest on Wall Street, according to data compiled by Bloomberg.

“If the growth outlook and investor confidence deteriorate even further, valuations could decline much more than we forecast,” Kostin wrote in a note. “We continue to recommend investors watch for an improvement in the growth outlook, more asymmetry in market pricing, or depressed positioning before trying to trade a market bottom.”

Kostin had first reduced his target from 6,500 on March 11, partly to account for declines in the technology heavyweights this year. 

US stocks have slumped on worries about the economic impact of Trump’s trade war. The president said he plans to start his reciprocal tariff push with “all countries,” tamping down speculation that he could limit the initial scope of levies set to be unveiled Wednesday.

The tariff whiplash has also led other Wall Street strategists to take a more cautious tone on the S&P 500 — an about-turn from just last week when many including Morgan Stanley’s Michael Wilson had suggested the worst of the recent downturn was likely over.

SOURING OUTLOOK

In a note Monday, Wilson said persisting growth risks are likely to cap upside on the S&P 500. “The reciprocal tariff announcement should offer some incremental clarity on tariff rates and countries/products in scope, but it’s likely a stepping stone for further tariff negotiations as opposed to a clearing event,” he wrote.

His peer at JPMorgan Chase & Co., Mislav Matejka, also expects further pressure on both stocks and bond yields as he sees higher inflation and an “activity air pocket” dominating the market narrative in the next six months.

Over at RBC Capital Markets, strategist Lori Calvasina flagged the S&P 500’s mid-March low of about 5,500 points as a key support level. A drop below that would raise the risk of stocks sinking as much as 20% from their February peak, she said.

“Any certainty on tariffs is unlikely to rewind the clock and take investors back to a time in which economic and national security weren’t obviously intertwined to the same extent as they appear to be today,” Calvasina said.