Over the past two years, stock market forecasters have continuously raised their expectations for the S&P 500 index to keep up with the market's relentless rise. However, less than three months into this year, sell-side strategists from firms including jpmorgan and rbc Capital Markets are beginning to express caution about their bullish 2025 forecasts. The reason lies in the concerns over slowing economic growth triggered by U.S. President Trump's tariff policies, which have also led to turbulence in the U.S. stock market.

Although no forecaster has explicitly lowered their expectations yet, this shift in sentiment, coming less than three weeks after the S&P 500 hit a record high, reflects growing uncertainty among Wall Street forecasters. According to an analysis by piper sandler & Co., historically, strategists' consensus targets tend to lag behind the market's actual performance by about 60 days.

JPMorgan strategist Dubravko Lakos-Bujas wrote in a note to clients, "It will remain difficult to fully handicap the potential policy downsides given lack of clarity on timing, scope, and depth of changes. In the interim, investors should embrace volatility."

His team warned last Thursday that their year-end target for the S&P 500 of 6,500 - a 13% increase from last Friday's closing price—might not be achieved by December due to the large standard error around this figure and increasing uncertainty.

Michael Kantrowitz, chief investment strategist at Piper Sandler, said, "I don't think anybody has more conviction today at all: more uncertainty, yes - a wider band of outcomes, yes."

Lakos-Bujas noted that the S&P 500 could fluctuate between his initial year-end target and a low of 5,200 throughout 2025.

This cautious stance contrasts sharply with earlier this year when JPMorgan and other major investment banks predicted steady market gains in the coming months, driven by deregulation, tax cuts, and other Trump policies perceived as growth-friendly.

The once-strong rally even turned Morgan Stanley's Michael Wilson, one of the market's most prominent bears until mid-2024, into a bull. The strategist still expects the S&P 500 to reach 6,500 by the end of 2025.

However, tariffs on goods from trade partners like Canada, Mexico, and China have dampened forecasters' optimism. Since Trump took office, U.S. stocks have faced a tough period, with the benchmark index falling in five out of seven weeks, and the Nasdaq 100 entering correction territory last Friday.

Wilson has turned cautious, warning that U.S. stocks could fall another 5% due to concerns over the impact of tariffs on corporate earnings and reduced fiscal spending. He expects the S&P 500 to drop to around 5,500 in the first half of the year before recovering. "I don't think anybody has more conviction today at all. More uncertainty? Yes. A wider band of outcomes? Yes." Wilson said.

The strategist also warned that the benchmark index could fall 20% if the economy slips into a recession. "We are not there, but things can change quickly so it's useful to know the downside in the bear case to manage one's risk."

JPMorgan's trading desk has also shifted to a tactically bearish stance, citing expectations of a significant decline in GDP, downward earnings revisions, and, most importantly, the need for Wall Street to reassess its year-end S&P 500 targets.

RBC Capital Markets' Lori Calvasina lowered her bear-case target for the S&P 500 from 5,775 to 5,600 based on a new stress-test model that now reflects flat corporate earnings and varying inflation and interest rate scenarios.

Calvasina wrote in a note to clients, "Strong post-election vibes were an important part of the bullish consensus on 2025 for US equities, which has come under pressure." She also asserted that the risk of a 'growth scare'—defined as a 14% to 20% decline - has increased for the S&P 500.

Nevertheless, strategists, including Calvasina, are sticking to their year-end targets for the S&P 500 for now, as the economy remains robust based on the latest jobs data and comments from Federal Reserve Chair Jerome Powell. Powell said last Friday that the Fed is in no rush to adjust monetary policy. According to a compiled forecast survey, Wall Street on average expects the S&P 500 to end 2025 slightly above 6,500.