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Several Wall Street banks including JPMorgan Chase are abruptly changing their forecasts for the US stock market.
JPMorgan Chase’s head of global market intelligence Andrew Tyler says the lender’s trading desk is flipping short-term bearish on the stock market amid a deteriorating macroeconomic backdrop, reports Bloomberg.
All in all, the US stock market has wiped out $3.4 trillion this year, giving up all of the gains witnessed since Trump won the election in November.
Tyler’s team sees President Donald Trump’s trade war as a headwind that could limit the US economy’s growth.
“With this in mind, we are changing our view to tactically bearish… Given the uncertainty, positioning, and potential for a negative feedback loop to push people to using the recession playbook, we think the bearish position makes the most sense.”
Earlier this week, Trump imposed 25% tariffs against both Canada and Mexico, leading to a 500-point drop in the Dow, alongside small drops in the Nasdaq and S&P 500.
As the equity market retreats, Goldman Sachs analyst David Kostin says in an investor note that equity valuations are not yet low enough to trigger a significant bounce. He also believes that the stock market will only regain bullish momentum if the US economy begins to show signs of strength.
“An improvement in the US economic growth outlook will be required to fully reverse the recent equity market weakness.”
On his forecast for stocks this year, Kostin says,
“Equity returns will be more modest than last year and match the trajectory of earnings growth.”
Meanwhile, Morgan Stanley believes that the stock market will see “muted” gains this year. Andrew Slimmon, the firm’s head of applied equity advisors team, says stocks have been in a bull market since 2023, leading to concerns that the market may be overvalued.
Slimmon also says that the third year of an equities bull market typically prints mediocre gains on average based on historical data.
“With enough negatives out there, including higher-for-longer interest rates and geopolitical noise, to cause a subpar year, the recently minted optimists could revert to being skeptics, only to have the market roar again in 2026. In that case, 2025 could be more of a pause year than anything more sinister.”
Last year, all three firms predicted that the S&P 500 would soar to greater heights this year, believing that a Trump presidency would create a favorable macroeconomic environment. JPMorgan, Goldman Sachs and Morgan Stanley predicted that the S&P 500 will reach a new all-time high of 6,500 points in 2025.
