This year, Wall Street institutions have made adjusting stock forecasts a routine practice unlike any previous period. While revising price predictions wasn't unheard of in prior years, such revisions have now become alarmingly commonplace.
Consider Goldman Sachs, often the subject of industry jokes. At the start of 2025, as former President Trump awaited his second inauguration, David J. Kostin, Goldman's chief U.S. equity strategist, painted a clear picture: another solid year of gains. He projected the S&P 500 would climb 11% to 6500 by year-end. Yet barely had Trump taken office when Kostin's conviction wavered.
First came DeepSeek's explosive emergence, sparking fears of an AI bubble collapse. Then Trump seized center stage, imposing the harshest tariffs in nine decades last April. Recession warnings echoed through trading floors, dragging the S&P toward bear territory. A week later, the president reversed course – his "TACO Trade" triggering the sharpest V-shaped recovery since the 1980s.
Amid these whiplash-inducing turns, Kostin revised his year-end target four times within four months – double his average annual adjustment frequency over the past decade. His turbulent journey reflects a broader phenomenon across Wall Street research desks.
Last December, the 19 strategists tracked by industry media forecasted a 13% S&P 500 surge to 6614. Oppenheimer's John Stoltzfus predicted a 21% leap, while even Cantor Fitzgerald's bearish Eric Johnston anticipated 2% gains. By May, the group had collectively slashed targets by 9 percentage points – outpacing their COVID-era flip-flops. Come June, many pivoted back to bullish stances.
The benchmark index closed Tuesday at 6243.76, marking a 6% year-to-date gain. Kostin now projects 6600, though Trump's unsettled trade agenda means further revisions loom. "Evolving tariffs create significant earnings uncertainty," Kostin recently cautioned clients. "Large-cap inventories may buffer initial rate hikes, but absorption will be gradual."
Trump's erratic policy maneuvers emerge as the primary catalyst for Wall Street's report-shredding frenzy. His second term forced strategists to overhaul forecasting frameworks. BlackRock briefly shortened its tactical investment horizon from 6-12 months to three, arguing compressed timelines better reflected market pressures.
Beata Manthey, Citigroup's global equity strategist, incorporated new geopolitical risk metrics after April's turmoil. Her models now suggest markets grew excessively optimistic post-rally. "Widespread bullishness raises concerns," Manthey noted, whose team cut its S&P target 11% in April before hiking to 6300 in June.
Some industry veterans question whether analysts took Trump too literally. Robert Buckland, former Citigroup strategist, argues forecasters erred by abandoning their initial stance of taking Trump seriously but not literally. "That inconsistency trapped them," Buckland observed. "During such volatility, silence often trumps haste. Errors matter less than how you respond."
Despite frequent miscalculations, Ned Davis Research's Ed Clissold defends the process, invoking Eisenhower's wartime wisdom: "Plans are useless but planning is indispensable." Forecasts, he contends, remain vital intellectual exercises – provided we acknowledge their inherent need for continual recalibration.
Comments