Barclays slashed its S&P 500 target to the lowest among the major banks, predicting that the index will end the year at 5,900.
Before Wednesday, the firm held a 6,600 target but cut its outlook amid deteriorating economic data and tariff disruptions, which have paralyzed markets so far this year.
RBC and Goldman Sachs have also downgraded their price targets this month, they expect the S&P to reach 6,200 — implying a record high by year-end. Meanwhile, Citi and HSBC this month downgraded their outlooks of US stocks to “neutral” without slashing price targets.
Barclays’ outlook suggests that the index has already peaked this year. The 5,900 target would deliver a meager 0.3% gain for the year.
“Our base case assumes that earnings take a hit as tariffs (higher China tariffs stick but do not escalate, reciprocal tariffs amount to 5% on RoW) contribute to material slowing in US activity that nonetheless stops short of outright recession, allowing valuations to gradually recover (60% probability),” Barclays analysts wrote on Wednesday.
Barclays Research
The Trump administration has made tariffs the centerpiece of its trade policy. Since taking office, duties on imports have kicked in on good from China, Canada, Mexico, and the European Union. President Donald Trump has said reciprocal tariffs will begin on April 2, and the president announced new auto tariffs would be unveiled on Wednesday.
Barclays expects Chinese and reciprocal tariffs to drag S&P 500 earnings per share down 1.6%. If countries retaliate with their own duties — as has already happened — earnings would fall another 0.7%.
Earnings growth is the biggest driver of stock market gains. Barclays has repeatedly warned about a drag on EPS from escalating tariffs and warned in December that a full-blown trade war would slash EPS by 2.8%.
But the scope and severity of the White House tariffs will matter. If Trump walks back tariffs, S&P 500 valuations could surge.
“However, in our bear case, the full impact of Canada and Mexico tariffs, in tandem with reciprocal and China tariffs, creates a much larger direct drag on SPX EPS growth, with second-order effects likely pushing US GDP into contraction and the S&P 500 into a bear market down to 4400,” Barlays said, citing 15% odds of this outcome.
