Investor Sentiment is Becoming Increasingly Nervous

Market Overview: Shifting Sentiment and Revised Projections

Investor sentiment is showing increased caution as market forecasts are being adjusted in response to changing economic conditions. Goldman Sachs has revised its year-end target for the S&P 500, projecting a decline to 5,300 points over the next three months, compared to earlier estimates of 5,500 points. At the same time, inflation expectations have been adjusted upwards, while projections for economic growth have been revised down. Anticipated reciprocal tariffs, expected to be announced on Wednesday, may introduce further uncertainty in the markets. As a result, Goldman Sachs has increased the probability of a US recession within the next 12 months from 20% to 35%.

Stagflation Risks and Market Performance Outlook

BCA Research has raised its expectations for stagflation, suggesting that the US stock market may experience below-average performance over the next 12 months. Additionally, concerns about the gradual unwinding of the AI-driven market bubble may contribute to further volatility in the equity markets.

Tech Sector Developments and Tesla’s Performance

Tesla shares have come under pressure following comments from brokerage firm Stifel, which reduced its price target to USD 455, although this remains above the current trading price. Deutsche Bank has also expressed concerns, indicating that Tesla’s first-quarter vehicle deliveries may fall between 350,000 and 380,000 units, significantly below earlier Wall Street estimates of around 475,000 units.

Several leading tech companies have also experienced target revisions:

• Amazon: Jefferies reduced the price target from USD 275 to USD 250.

• Meta Platforms: Price target lowered from USD 810 to USD 725.

• Microsoft: Target revised down from USD 550 to USD 500.

• Pinterest: Wells Fargo cut its target from USD 47 to USD 42.

• Snap: Target reduced from USD 11 to USD 9.

  
  

S&P 500: Adjusted Targets and Inflation Concerns

Goldman Sachs has once again adjusted its projections for the S&P 500, now anticipating a decline to 5,300 points within the next three months and reducing its 12-month target to 5,900 points. Projections for US tariffs on imported goods have also been raised, with expectations shifting from an effective 10% rate to 15%. Additionally, the core PCE inflation rate is now expected to increase by 0.5% to 3.5%.

Revised Growth Projections and Increased Recession Risk

Goldman Sachs has lowered its expectations for real GDP growth in the first quarter to 0.2%, while the annualised growth rate for 2025 is now forecasted at 1.5%, reflecting a downward revision of 40 basis points. The likelihood of a recession within the next 12 months has consequently been increased to 35%, up from the previous estimate of 20%.

These adjustments are based on an observed deterioration in business and consumer sentiment, combined with an increased willingness by policymakers to tolerate short-term economic weakness. Additionally, the rise in US tariffs has heightened the risk of stagflation, with slower growth potentially accompanied by higher inflation.

Disclaimer: This content is for informational and educational purposes only and does not constitute financial advice. It does not consider your personal objectives, financial situation, or needs. You should consider whether the information is appropriate for your circumstances and seek professional advice before making any investment decisions. Investing in stocks carries inherent risks, and the application of any strategy may not eliminate the risk of loss. Market conditions, volatility, and unforeseen events can impact outcomes, and past performance is not indicative of future results.