Investing.com -- Barclays analysts have lowered their 2025 S&P 500 price target to 5900 from 6600, citing tariffs and deteriorating survey data as key drivers of their revised outlook.
"Our base case assumes that earnings take a hit as tariffs (higher China tariffs stick but do not escalate, reciprocal tariffs amount to 5% on RoW) contribute to material slowing in US activity that nonetheless stops short of outright recession, allowing valuations to gradually recover," said Barclays (LON:BARC).
The firm lowered its base case EPS estimate to $262 from $271, applying a 22.5x multiple to reach the revised 5900 price target, assigning a 60% probability to this scenario.
However, Barclays outlined both bull and bear case outcomes, emphasizing uncertainty around trade policy impacts.
In the bull case, Barclays assumes that Trump walks back tariffs due to political and industry pressure, easing trade tensions and allowing the S&P 500 to re-test highs up to 6700. This scenario was assigned a 25% probability.
Conversely, in the bear case, Barclays warned that tariffs on Canada, Mexico, and China could significantly drag down earnings, potentially pushing U.S. GDP into contraction and sending the S&P 500 into a bear market at 4400 (15% probability).
Sector-wise, Barclays upgraded Financials to Positive from Neutral, citing attractive NTM P/E valuations and strong earnings momentum, despite macro risks.
"Financials could benefit as policy focus eventually shifts away from trade and potentially toward deregulation," said Barclays.
Meanwhile, the firm downgraded Discretionary and Industrials to Negative from Neutral, citing concerns over weak consumer sentiment, slower growth, and higher inflation from tariffs.
"Industrials look expensive vs. history and are exposed to both trade policy and tenuous manufacturing PMI," Barclays noted.