S&P sell-off to worsen, warn Wall Street trading desks

by Natalia Kniazhevich

Wall Street trading desks disagree on many things, but there’s one view they now seem to share: President Donald Trump’s looming tariff announcement will likely exacerbate the S&P 500 Index selloff, at least in the near term.

Many Wall Street firms — including Goldman Sachs Group Inc. and Bank of America Corp. — expect Wednesday’s highly anticipated trade measures to raise stock market volatility and deepen the slide in the benchmark US equity gauge, which just came off its worst quarter since 2022.

Concern is rising among trading floors, which analyze the flow of funds across institutional and retail investors to predict the market’s next move, that Trump’s trade war can cut into corporate earnings and destabilize companies’ supply chains. Stocks surged in the weeks after Trump’s election victory, with investors and sell-side analysts cheering his plans to slash taxes and regulations, while largely dismissing tariff threats as a negotiating tactic. Now, the mood has changed. 

“The bearish calls are getting louder across the floor and client base,” Goldman Sachs’ trading desk wrote in a March 28 note, pointing to a level of expected volatility this week that’s comparable to the US election in November.

The concerns are reverberating throughout major trading desks on Wall Street. JPMorgan Chase & Co.’s trading desk remains tactically bearish on stocks, citing policy uncertainty and the potential impact of tariffs on the economy. Over at Barclays Plc, global head of equities tactical strategies Alexander Altmann said his main concern is Trump’s announcement will leave room for interpretation, keeping trade policy in flux.

“Uncertainty is the killer of everything in markets,” he told Bloomberg News. “It kills investment decisions, corporate spending, as well as business and consumer confidence.” 

Anxiety is running high as Trump plans on Wednesday to announce sweeping levies on all of America’s trading partners. Official data on Tuesday showed US factory activity contracted in March for the first time this year and prices accelerated sharply for a second month as the drumbeat of higher tariffs reverberated through the economy. The S&P 500 is down 8.3% from its February 19 record.

Wall Street’s sell-side strategists are turning sour on the direction of the stock market as well. At the end of last year, strategists were forecasting that the S&P 500 would rally for a third consecutive year, with an median forecast of 6,600 at year-end. Three of Wall Street’s most reliable bulls have now acknowledged that they were too optimistic in their estimates for the index this year — but they still believe stocks will rally over the remaining three quarters of 2025.

Several trading desks warn that the S&P 500, sitting at about 5,600, has more room to fall. Bank of America Corp.’s John Tully said the US benchmark could fall below 5,500, while a recent note from UBS Group AG said the stock gauge could drop to 5,400 if the White House implements 20% tariffs. 

“There is a wide range of outcomes with a violent tail in both directions,” Michael Romano, head of hedge fund equity derivative sales at UBS Securities, wrote to clients. “What’s particularly concerning are the high probabilities being assigned to the extreme downside moves.”

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