S&P 500 is still exaggerated

Welcome to your return. Each development and rotation from the White House brings a new gathering or a new sale in the S&P 500. But is the market lacking the largest image?

Despite the signs of a Satisfy the American economyDonald Trump identification and uncertainty plans, Wall Street still expects the main stock index in the United States to end slightly less than 6000 on average. This means that the market will rise by S&P 500 by at least 5 percent between now and December 31.

So this week, I will clarify the case for the reason for the market error, and why is it likely to end S&P 500 this year Significantly Less than its current level than 5525.

Ultimately, the stock market expectations at the end of the year support the annual economic expectations of investors and their evaluation of structural drivers, such as American artificial and exceptional intelligence.

For 2025, analysts expect the S&P 500 to be unchanged last year. This is a noticeable reduction from the past two years of consecutive annual growth above 20 percent. But is it still very optimistic?

Let’s start with economic basics. Last month, I argued that America was heading to the recession. (This was dependent on the economic weakness in Trump’s second state, the uncertainty in its policies, and the possibility of implementing some import duties.) I appreciate that this is not the view of Wall Street, so far.

Analysts focus more on actual tariff ads. Indeed, since “Liberation Day”, the expectations of consensus for 2025 and the possibility of recession in the next 12 months have declined to 45 percent. Most of them expect the effective tariff rate in the United States (pre -cancellation effects) from about 10 to 20 percent this year. It is currently estimated at About 28 percentAfter 2025 began approximately 2.5 percent.

These predictions seem reasonable: in particular the high tariff of last year and a slower growth, even if there is no stagnation. However, the market is still pricing more optimistic than this.

“The information derived from risk assets does not even indicate that the markets consider that moderate slowdown will be formed this year,” said Daniel von Ahn, a large macro strategy in TS Lombard, using the simple slope model to estimate American growth forecasts from asset prices.

Corporate profits expectations this year remain very high. It is easier for Wall Street to make purchase and sale decisions based on the elements of the risk or risk news. The judgment may take longer its impact on companies.

“The profit estimates usually decrease during the light recession,” said Peter Perezin, BCA RESEARCH. “But the market is currently supposed to grow in profits by 10 percent over the next 12 months. This is outside the margins of profit last year.”

Analysts may be very optimistic about companies’ ability to pass any tariff costs for consumers. The most importing sectors – more – industries, materials and consumer appreciation – notice a limited pricing power, and the US -shares strategy team at BCA Research.

Assuming that companies will not be able to raise prices significantly, it indicates that the Trump tariff reduces the S&P 500 net margins by 2.2 percent. This would translate into a 19.2 percent decrease in the S&P 500 profits per share, all of this is equal (based on 10 percent customs tariff rates, and Chinese import duties belonging to the pre -recovery rate of 54 percent, steel, aluminum and car cars by 25 percent.

For evaluation, Goldman Sachs estimate that each percentage rises in the rate of tariffs in the United States leads to a decrease of S&P 500 EPS to between 1 to 2 percent.

Whatever the expectations of customs tariffs, the expectations of consensus, provided that EPS will grow significantly in 2025 present Economic environment: high uncertainty, consumer confidence, weak investor, and high import duties. ((Scheduled ships The Los Angeles port is expected to decrease dramatically on an annual basis within two weeks.

Profit reviews come quickly now. Ironically, the number of times of profits by analysts for 2025 at stagnation levels, although the actual sizes of cutting cuts remain relatively less important. With the low profits expectations, the prices will be followed, as analysts calibrate the assessments.

For evaluation, the price rate to profits (how many investors are ready to pay each dollar of future profits) is about 19 years old. In the five years before the epidemic, it was closer to 17 years. In all recession since 1980, an average of about 10.

Using the Goldman Sachs’ S & P 500 sensitive matrix, the modest forecasts for EPS are still growing by 3 percent this year and re -advanced to P/E to return to the top of the prenatal average, would put the index closer to 4,550.

Of course, the S&P 500 can avoid such a huge fall if the structural factors provide purchase.

But first, artificial intelligence narration reaches road barriers. Dibsic low -cost mode in China highlights billions that American technology companies spend in artificial intelligence capital. Trump’s commercial ads – including planned duties to Asian technology manufacturing centers and chips export restrictions – added more pressure.

“We are still waiting for” a fatal application “that justifies the heavy residence that occurs. The low barriers that prevent the construction of large linguistic models also raises more questions about the Seven Magnificent that you can generate,” explains Hugh Griffis, the director of the box at Premier Miton Investors. (They are only slowly residing how the definitions affect their profits. “

Stock prices have decreased to the seven wonderful technology companies significantly since Trump’s inauguration. But analysts are unclear in what is priced. Companies represent a third of the market value of the S&P 500. (It also distorts the net profit margin estimates for the entire stock market to the top.) So selling them an easy way to reduce risk exposure such as news.

However, the P/E complications to the front remain higher than the prenatal levels (individually and collectively). Prices can decrease more with their profit reassurance, whether in terms of customs tariffs or intelligence noise.

Second, the exception of the United States. For years, America has attracted capital by virtue of its deep liquidity, stability and a safe infiltration of its origins. This enabled the S&P 500 to grow beyond the economic basics.

But the narration weakens. In March, the questionnaire of the Fund’s Director of Bank of America cut American stock holdings before Most of them are at all. The definitions weighing inconsistent with America. Its companies refer to the greatest beneficiaries of the “Made In Asia” model, as Matt King, founder of Satori Insights. (Revenge measures will harm American companies as well.)

Political turmoil, radical uncertainty, high risk of financial stability and attacks on independent economic institutions (such as the American Federal Reserve recently) makes the United States a less reliably reliable place in capital.

“The United States has moved from” the cleanest of a dirty shirt “to being one of the most rich elements rich in the investment treasury,” says King. “Even after this year’s correction, American stocks retain a large exceptional premium on the P/Es forward by 50 percent of non -American stocks.”

This exposes America to more capital journey, depending on the attractiveness of opportunities abroad and Trump’s actions. Ironically, if the president’s mandate continues with its start, the United States will be more dependent on improving the economic basics to build a momentum.

S&P 500 fluctuations to about 10 percent of the February Summit. But the flow of news makes it difficult to know what it is not priced.

The continuous sincere advertisements of politics, exemptions, postponement and denial of investors means to restore them every day, as they consider the risks for the previous day. This then transforms the goals of the goals to judge the expectations of growth and profitability.

Despite all the noise, however, the market appears to be still in a position of hope. The stocks are not yet at moderate prices. “In order for the S&P 500 to where the consensus is now, Trump will need to be targeted immediately,” Peresin believes.

Recent climbing climates certainly indicate that the president can somewhat be transformed. But in an amount? And when? If most investors are reasonably expecting tariff prices that the tariffs will be stabilized at least Several complications are higher under Trump than the place where they started in 2025, not fully priced, along with the continuous impact of economic uncertainty.

Wall Street’s profits and growth expectations have more fall. As they do, the markets may increase the scrutiny of artificial intelligence novels and the United States. For this reason I am afraid that the S&P 500 year will end not with a 5 handle, not to mention 6 – but with 4.

Send rejection, reflections and S&P 500 expectations at the end of the year to [email protected] Or on x @Teapperikh90.

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