S&P 500 Outlook: Barclays Lowers Target Amid Tariff Concerns

Since the close of trading yesterday, market developments have been relatively quiet, with few significant updates. Barclays has revised its year-end target for the S&P 500, lowering it from 6,600 to 5,900 points due to persistent uncertainty surrounding US tariff policies. This new target is only slightly above current market levels, reflecting a cautious outlook.

With reciprocal tariffs on China, the EU, Canada, and Mexico expected to be announced next Wednesday, investor sentiment remains fragile. Adding to the caution, Goldman Sachs has warned that Wall Street’s current optimism may be overstated, leaving room for potential disappointment.

Despite the subdued news cycle, earnings reports from Chewy and Dollar Tree have been well received, with both stocks trading higher following positive results.

Economic Insights: Bond Auctions and Fed Commentary in Focus

Following strong demand for $69 billion in 2-year US Treasury bonds auctioned yesterday, the US Treasury will auction $70 billion in 5-year bonds today, with results expected at 6:00 PM CET. These results could influence government bond yields and broader market sentiment.

In addition to bond activity, two key Federal Reserve officials are scheduled to speak today:

• Neel Kashkari, President of the Minneapolis Fed, will deliver a speech at 3:00 PM CET.

• At 6:10 PM CET, the President of the St. Louis Fed is also expected to provide remarks.

Fed Policy Signals:

• Raphael Bostic (Atlanta Fed) reiterated his position that only one more rate cut should be expected this year.

• Austan Goolsbee (Chicago Fed) expressed concern that rising market expectations for long-term inflation may signal the need for a more restrictive monetary stance.

  
  

S&P 500 Outlook: Navigating Tariff Risks

Barclays has revised its S&P 500 target for 2025 downward to 5,900 points, the most conservative projection on Wall Street. With reciprocal tariffs on China, the EU, Canada, and Mexico set to take effect on April 2, uncertainty around US economic prospects continues to weigh on sentiment. Concerns about the impact of tariffs on corporate earnings and growth prospects further cloud the outlook.

Potential Market Scenarios:

🟢 Upside Scenario:

If the Trump administration reverses course on tariffs due to mounting pressure from various industries, reducing economic headwinds, the S&P 500 could rally to 6,700 points. Barclays assigns a 25% probability to this positive outcome.

🔴 Downside Scenario:

If tariffs remain in place against Canada and Mexico, combined with continued tariffs on China and the introduction of reciprocal tariffs, the US economy could face a recession. This scenario could result in a sharp decline in corporate earnings, potentially driving the S&P 500 down to 4,400 points. Barclays assigns a 15% probability to this adverse outcome.

Sector Preferences:

Despite the prevailing uncertainties, Barclays analysts maintain a preference for the healthcare and Big Tech sectors. These sectors are viewed as more resilient and better positioned to withstand potential market volatility.

Earnings Spotlight: Mixed Results Across Key Companies

Chewy:

• Earnings and revenue surpassed expectations.

• The outlook for Q1 and 2025 remains in line with market forecasts, indicating continued stability.

  
  

Dollar Tree:

• Earnings marginally exceeded expectations, although results were clouded by the sale of Family Dollar.

• Projections for Dollar Tree alone remain positive for 2025, with performance expected to meet or slightly exceed targets.

• Family Dollar, acquired for $9 billion a decade ago, is now being sold to two private equity firms for approximately $1 billion.

  
  

GameStop:

• Revenue fell slightly short of expectations, while earnings came in above target.

• GameStop announced plans to invest in Bitcoin, aligning with a strategy similar to that of MicroStrategy, which has used Bitcoin as a treasury asset to hedge against inflation.

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