Investing.com -- Evercore ISI expects the S&P 500 index to reach 6,800 by the end of 2025, but sees a volatile path toward that target.
The investment bank notes that recent trade developments reinforce a pattern observed during the first US-China trade war: escalating tensions tend to follow market strength.
With President Trump recently initiating a new trade war, Evercore ISI strategists argue that “we can expect any market resilience or subsequent strengthening – to set the table for Trade War II escalation, more tariffs to come.”
The S&P 500 currently trades at a 24.9x trailing multiple, with the VIX volatility index at 16.6, levels that Evercore ISI describes as reflective of both risk and complacency.
Evercore highlights the parallels to 2018, when stocks appeared resilient for months before experiencing significant pullbacks near all-time highs.
Against this backdrop, the investment bank favors defensive positioning, recommending stocks with low volatility and high buyback activity, labeled as “Trade War Heroes.”
Additionally, it suggests using market turbulence to add exposure to companies classified as “AI Enablers, Adopters, and Adapters,” which are seen as central to the S&P 500’s path to 6,800.
“Key to navigating Trade War II is to prepare for volatile short term episodes on the way to further upside in 2025,” Evercore strategists led by Julian Emanuel noted.
The S&P 500 was just 1.4% below its January 24 record high when the February 1 tariff announcement was made. The market had already recovered most of its initial losses when President Trump signaled further reciprocal measures, reinforcing expectations for more tariffs beyond just China and the EU.
Mexico and Canada could also face trade actions ahead of the April 1 executive order deadline.
“Past is looking a lot like prologue,” Evercore’s team continued.” To this end, we can expect any market resilience – the S&P 500 sits just 2.6% from its all time high – or subsequent strengthening to set the table for Trade War escalation, leveraging the advantageous position of the “High Ground”.”