HSBC slashes S&P 500 forecast amid tariff turmoil

In the United States on April 29, 2025, HSBC announced a significant adjustment to its S&P 500 year-end forecast. Nicole Inui, the head of equity strategy for the Americas at HSBC, lowered the target from 6,700 to 5,600—a reduction of more than 16%. This decision stems from ongoing tariff uncertainties that have begun impacting business operations and investor sentiment. Inui also revised down the bank's earnings estimate for the S&P 500, predicting that earnings would be $255, which signifies only 6% growth for the year, below consensus expectations. The reduction in the S&P 500 target reflects concerns about the overall economic environment as uncertainty surrounding trade policies grows. Investors have been particularly wary of the implications of President Donald Trump's tariffs, especially those targeting China, a key trading partner for the U.S. The situation is compounded by reports that disruptions in supply chains could be on the horizon, with indications that shipping volumes at the Port of Los Angeles would drop by 35% the following week as the tariffs begin to take effect. Inui cautioned investors to adopt a defensive posture, as economic volatility may lead to significant market fluctuations. Historically, instances of uncertainty have coincided with substantial pullbacks in market valuations. In her assessment, Inui noted that downturns of as much as 25% are commonplace during turbulent times. A severe recession could even push the market lower by 30% relative to its peak. To navigate this potential instability, she advised investing in sectors that typically perform well in such conditions, pointing out that staples and healthcare usually fare better during recessions, while commodities also show strength during stagflation—an economic scenario characterized by stagnant growth and high inflation rates. HSBC is far from alone in revising its outlook; other major banks on Wall Street have similarly adjusted their predictions in response to the current environment. Bank of America Merrill Lynch has also reduced its forecast to 5,600, while Goldman Sachs lowered its prediction to 5,700. Inui's bearish outlook underscores the critical nature of ongoing tariff negotiations, indicating that until these issues are resolved, uncertainty will likely overshadow market performance. It is anticipated that the market narrative may continue to fluctuate between fears of recession and stagflation until the Federal Reserve takes measures to ease the situation, such as implementing interest rate cuts or until inflationary pressures stabilize.