Wall Street’s View on S&P 500 Profits Is Souring as Tariffs Loom

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Jessica Menton and Alexandra Semenova

Sat, Mar 15, 2025, 6:00 AM 4 min read

Though the broad outlook for corporate earnings remains strong, analysts have been steadily trimming their expectations for company results in the next 12 months. Profit forecasts for S&P 500 Index companies have seen more downgrades than upgrades for 22 of the past 23 weeks, according to Bloomberg Intelligence, the longest stretch since early 2023.

A darkening earnings picture would be an unwelcome development for stock investors, after worries over the economic impact of President Donald Trump’s tariff policies spurred a selloff that has dragged the S&P 500 around 8% from last month’s record. With robust earnings expansion needed to justify the market’s still-elevated valuations, signs that companies may struggle to meet profit expectations in the months ahead could further sour sentiment.

“The earnings outlook is starting to crack,” said Eric Beiley, executive managing director of wealth management at Steward Partners. “This drawdown in stocks is signaling to sell-side analysts that they need to bring down their annual profit outlooks even further from here.”

While first quarter earnings season kicks off on April 11 with a report from JPMorgan Chase & Co. and other banks, some US companies are already sending worrying signals.

American Airlines Group Inc. on Tuesday predicted its first-quarter loss would be roughly twice as big as expected, a day after bellwether Delta Air Lines Inc. cut its profit outlook in half, with both carriers citing weakening demand for air travel. Retailers including Kohl’s Corp., Abercrombie & Fitch Co. and Walmart Inc. have also sounded a cautious note.

Analysts still see a 10% advance in S&P 500 earnings in 2025, down from a 13% forecast in early January, BI data show. But there may be ample room on the downside: Yung-Yu Ma, chief investment officer at BMO Wealth Management, said analysts will likely need to trim their annual S&P 500 profit estimates for 2025 to the high single-digits to account for the restraint tariffs would put on corporate profit margins.

“There’s still the risk of estimates falling as more companies guide around Trump’s tariff policies,” said Scott Chronert, head of US equity strategy at Citigroup Inc.

Others have already reeled in their earnings estimates. David Kostin, chief US equity strategist at Goldman Sachs Group Inc., on Tuesday reduced his full-year earnings growth estimate to 9% from 11%. He now sees the index ending the year at 6,200, down from a previous forecast of 6,500. That would still be a nearly 10% gain from Friday’s close.

An earnings picture that grows too bleak could weigh on stocks. Evidence that investors are already bracing for more downside ahead can be seen in the record highs in gold, a popular safe haven. Prices for US government bonds, another popular destination for nervous investors, have risen since mid-February.

Keith Buchanan, partner and senior portfolio manager at Globalt Investments, has been selling some large-cap growth shares and raising his cash allocation.

“It only makes sense to err on the side of caution,” he said.

Of course, corporate results in recent years have shown resilience in the face of everything from soaring inflation to the highest interest rates in decades. Investors hope Trump will either soften or remove tariffs before they pinch profits.

It could also take months before more sell-side analysts and companies guide forecasts lower, according to Michael Casper, equity strategist at BI. Such a scenario played out during Trump’s first term: though the US trade war with China heated up in the early months of 2018, the hit to corporate profits only showed up about a year later, according to BI data.

Still, Casper noted that the economy had the tailwind of big corporate tax cuts during that period. Pressure has grown on Trump to push through a sweeping tax bill in his second term, as economic worries mount.

For Michael Shaoul, chief executive officer and founding partner at Ion Macro Management, earnings have not figured into the recent selloff, which he said has been driven by investors unwinding overstretched positions in US megacaps and reallocating funds to Europe and Asia.

He remains optimistic on corporate profits and the longer term performance of stocks. However, “if any negative earnings surprises are injected into the market, things will get more turbulent from here,” he said.

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