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The S&P 500 (^GSPC) is trading near record highs despite trade tension risks. Analysts indicate that for every five percentage point increase in the US tariff rate, the S&P 500 earnings per share (EPS) estimates will decrease by 1% to 2% in 2025.
NewEdge Wealth chief investment officer Cameron Dawson joins Morning Brief with Seana Smith and Brad Smith to discuss her market outlook.
"We think the most important thing that has driven this bull market over the last two years is that 12-month forward EPS estimates have continued to climb higher, and so if you start raising doubts that that is capable of continuing to happen, that's where you start to see the potential for a more sideways, choppy, volatile market," Dawson says, explaining, "If 12-month forward earnings estimates level off, equity returns will also level off."
The strategist notes that "even though fourth quarter earnings season has come in better than expected ... analysts for '25 and '26 have actually been cutting their numbers just slightly." She says the cuts are only 1% to 2%, "but it's definitely a change [to] this ever-rising estimate revision higher, which has, of course, supported the rally."
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Dawson outlines her base case for 2025 as "a wide, choppy range, which is to say that yes, [the S&P 500] can reach that 6,600 level at some point over the course of the year, but it's also likely that you could experience a 10% correction."
To watch more expert insights and analysis on the latest market action, check out more Morning Brief here.
This post was written by Naomi Buchanan.