The S&P 500 still has a significant price

Welcome again. Each turn and turn of the White House provides a new manifestation or sale to the S&P 500. But the market lacks the largest image?

In spite of the signs of a slowing down the US economyDonald Trump’s fare plans and the stupid uncertainty, Wall Street analysts are still waiting for the U.S.’s main rate to end in 2025 below the average 6,000. This means that the market projects the S&P 500 will increase at least 5 percent between now and December 31.

So this week I will set out the case why the market is wrong and why the S&P 500 is more likely to end this year meaningful below its current level of 5,525.

Finance stock forecasts are finally based on the annual economic prospects of investors and their evaluation of structural engines, such as artificial intelligence and exceptionalism in the United States.

By 2025, analysts are essentially waiting for the S&P 500 level to change widely last year. This is a remarkable marking of the last two years of consecutive annual growth over 20 percent. But is it still too optimistic?

We start with economic foundations. Last month I argued that America was heading for a recession. (This was based on the economic weakness in Trump’s second term, the uncertainty of his policies and the possibility of implementing some import duties.) I appreciate that this is not Wall Street’s vision.

Analysts are more focused on real rate ads. In fact, since the “liberation day”, consensus growth forecasts for 2025 have fallen and the odds of a recession in the next 12 months have increased by 45 percent. Most expect that the United States Effective Effective Rate (Pre-Substitution Effects) will be resolved around 10 to 20 percent this year. Is currently estimated at About 28 percentAfter starting by 2025 about 2.5 percent.

These forecasts seem reasonable: especially rates higher than last year and slower growth, even if there is no recession. However, the market is still a more optimistic price than this.

“The information derived from risk assets does not even suggest that markets consider a mild slowdown to be shaped this year,” said Daniel von Ahlen, a Senior Macro Strategus of TS Lombard, who uses a simple regression model to estimate the growth forecasts in the United States from assets.

The expectations of corporate gains this year are still too high. It is easier for Wall Street to make purchasing and sale decisions based on perceived or risk risk news. By judging its impact on business lines of companies may take longer.

“Estimates typically gains decrease during even minor recessions,” said Peter Berezin, a world strategist in BCA Research. “But at present the market is a growth of gains closer to 10 percent over the next 12 months. This does not have less the benefit margins of last year.”

Analysts can be too optimistic about companies’ ability to go through any consumer fares. The most important, industrial, material and discretionary consumer, also have limited pricing power, indicates the United States Equity Strategy Team of BCA Research.

If we assume that companies will not be able to increase their prices significantly, it shows that Trump’s rates reduce the S&P 500 net revenue margins by 2.2 percentage points. This would result in a decrease of 19.2 percent of the benefits of action of S&P 500, all equal (based on the 10 percent rates for all countries, the Chinese import functions that return to their pre-pre-ally rate of 54 percent, and steel, aluminum and specific cars of the car to 25 percent.)

For the measure, Goldman Sachs estimates that every 5 percentage of percentage points of the United States rate rate causes S&P 500 EPS to fall between 1 and 2 %.

Whatever the fare perspective, consensus forecasts for EP to grow significantly by 2025 disagree with the current Economic environment: high uncertainty, consumption confidence and weak investors and high import rights. ((Scheduled ships The port of Los Angeles is expected to drop significantly year after year in two weeks.)

Results reviews are rapidly achieved. The number of proceeds from analysts by 2025 is ironically at levels of recession, although the real magnitudes of casualties remain relatively less significant. As the projections of profits are reduced, prices will follow, as analysts calibrate the ratings.

For the extent, the pre-capacity relationship (the number of investors are willing to pay for each dollar of future gains) is currently around 19 years. In the five years before the pandemic, he approached 17 and in all recessions since 1980, he has promised about 10.

Using the S&P 500 sensitivity matrix of Goldman Sachs, a still modest forecast for the EPS to grow 3 percent this year and the proportions P/E by repayment above the pre-paid average would put the index closest to 4,550.

Of course, the S&P 500 may dodge such a strong fall if structural factors provide a purchase impulse.

But first, Ai’s narrative is hitting route blockages. Deepseek’s low cost model launching in China focused on the billions of US technology companies in Ai Capital. Trump’s commercial ads, including scheduled duties on Asian technology manufacturing centers and chip export restrictions, have added more pressure.

“We still expect a ‘murderer application’ that justifies the heavy.” (They) are only slowly evaluating how rates affect their gains. “

The prices for the actions of the magnificent seven technological businesses have dropped substantially since Trump’s inauguration. But analysts are not clear what is priced. Companies represent a third of the S&P 500 market capitalization (there are also net profit estimates for the entire rise bag.) So selling them is a simple way to reduce risk exposure as news.

However, their multiple multiples P/E remain above the pre-pandemic levels (individually and collectively). Prices could lower even more as their profitability reassessed, both in terms of rates and AI.

Secondly, U.S. exceptionalism. For years, America has attracted capital by virtue of its deep liquidity, stability and the state of its assets. This allowed the S&P 500 to grow beyond economic foundations.

But the narrative is weakening. In March, respondents in the Bank of America’s fund manager survey reduced their holdings from the United States most in registration. The rates weigh disproportionately in America. Its companies are the biggest beneficiaries of the “Made in Asia” model, emphasizes Matt King, founder of Satori Insights. (Retaliation measures will also hurt us for companies.)

Politics disorder, radical uncertainty, increased risks of financial stability, and attacks on independent economic institutions (such as the most recently federal Federal Reserve) make the United States a less reliable place to park the capital.

“The United States has gone from the” cleaner gross shirt “to be one of the utmost and, however, even more expensive than the investment wardrobe,” says King. “Even after this year’s correction, American shares retain significant exceptionalism that is negotiated with P/ES 50 % higher than non-American shares.”

This exposes America to another capital flight, depending on the attractiveness of overseas opportunities and Trump’s shares. Paradoxically, if the president’s mandate continues as it has begun, the United States will depend more on the improved economic foundations for building a purchase boost.

The S&P 500 has oscillated about 10 percent of its peak in February. But news flow makes it difficult to know what it has and is not priced.

The constant reduction in policy ads, exemptions, postponements and denials means that investors are again prices every day where they consider the risk to the day before. Then change the goals to judge growth and profitability forecasts.

However, for all the noise, the market still seems positioned to get a hopeful result. Stocks do not even have a price right now for a slight fall. “For the S&P 500 to rise to where the consensus is, Trump should immediately go back the rates,” says Berezin.

Of course, the recent climbs suggest that the president can become a bit. But how much? And when? If most investors reasonably expect the tariff rates that will end at least Several multiple multiples in Trump where they started in 2025, still have to have a total price, along with the persistent impact of economic uncertainty.

Wall Street growth and growth projections need to fall even more. As they do, the markets can also further examine the narratives of the IA and the US exceptionalism. That is why I am afraid that the S&P 500 will end the year not with a handle of 5, much less a 6, but with a 4.

Submit your refutations, reflections and S&P 500 forecasts freeelunch@ft.com ox @TEPPERIKH90.

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