Major bank slashes S&P 500 forecast amid economic fears

In the United States, market analysts are increasingly concerned about economic growth as evidenced by RBC Capital Markets' recent action. On March 17, 2025, the firm announced a reduction of its year-end forecast for the S&P 500, adjusting it down by 400 points to 6,200. This change comes amidst rising fears that economic momentum may be slowing, which has sent shockwaves through investors looking for stability in a volatile environment. RBC's Lori Calvasina highlighted that her new forecast represents a 6.1% decline from their previous target of 6,600, implying only a modest 5.4% increase from last year’s closing value. This downward adjustment underscores a turnaround from the market’s strong trajectory of the past two years, as the S&P 500 previously reached all-time highs in early 2025. The sentiment of investors, consumers, and business owners has become increasingly pessimistic, largely influenced by recent economic data and sentiment regarding President Donald Trump’s tariff policies. The shifting outlook has created an air of uncertainty, prompting RBC to reassess expectations and contribute to a broader conversation around the potential risks facing the U.S. economy. Moreover, the S&P 500 recently experienced a sharp decline, losing 2.3% in a week, fueled in part by recent tariffs that stoked fears concerning inflation and overall economic health. Analysts are worried that such downward trends lead markets closer to a correction territory where retreat is defined as at least a 10% drop from recent highs. The concerns about inflation and interest rates are further exacerbated as the Federal Reserve is expected to maintain interest rates unchanged. Investors are closely monitoring the statements from the Federal Reserve, particularly the Summary of Economic Projections (SEP) set to be discussed by Fed Chair Jerome Powell in a press conference scheduled for the afternoon of March 18, 2025. The SEP will include crucial information about economic growth and inflation predictions, and it is anticipated that the Fed's comments might offer insight into the current economy's strength. As RBC aligns itself with Goldman Sachs in reducing the S&P 500 target, analysts expect that the market's recovery will face challenges. Together, both firms have positioned estimates at the low end of forecasts, suggesting that they remain cautious about the market's trajectory amidst the volatile economic indicators. The combination of tariff-related instability and economic uncertainty represents a precarious moment for investors as they navigate through this economically challenging landscape.