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Goldman Sachs just cut its 2025-end target for the S&P 500 (SPY) to 6,200 from 6,500, pointing to rising policy uncertainty, tariff risks, and a weakening economic outlook. The market has already felt the heaton Monday, the S&P 500 took its worst hit since December, erasing a jaw-dropping $4 trillion in market value. The biggest culprit? The Magnificent Seven stocks, which have tumbled 14% in just weeks, dragging their P/E ratios down from 30x to 26x. Goldman's team says a lower GDP growth forecast and steeper tariffs factored into their revised call, along with a higher equity risk premium that's keeping investors on edge.
It's been a rough stretch for the S&P 500, now down 9% from its peak, with most of the damage tied to those high-flying tech giants that powered last year's 25% rally. And it's not just about earnings or valuationspolicy jitters are rattling investors. A case in point: Trump's sudden move to slap tariffs on Canada (before reversing course), which nearly pushed the index into correction territory. Hedge funds and institutional players have been unwinding their positions, making the downturn even sharper. The selloff is a stark reminder that markets don't just move on fundamentalssentiment and positioning can flip the script fast.
Some say this is just a bump in the road, but others warn the market might not snap back so easily. Goldman's downgrade reflects a 4% cut in its fair-value forward P/E multiple, now at 20.6xsuggesting investors are demanding more cushion for the risks ahead. With uncertainty swirling around trade policy, economic growth, and how much risk investors are willing to stomach, all eyes are on the next market catalyst. Will buyers step in, or is more downside in store?
This article first appeared on GuruFocus.