Investing.com -- Deutsche Bank, one of Wall Street’s most bullish equity forecasters, has cut its year-end S&P 500 target from 7,000 to 6,150, citing the growing economic damage from the U.S. trade war.
The bank also lowered its EPS estimate for 2025. “With the potential impact of the announced tariffs large and likely to fall disproportionately on U.S. companies, we lower our S&P 500 EPS estimate for 2025 from $282 to $240,” Deutsche Bank analysts wrote. That would mark a 5% decline from last year’s earnings.
The firm outlined a range of factors behind the downgrade, including foreign suppliers’ limited ability to absorb tariffs, the hit from lost China trade, and “potential backlash on U.S. sales abroad.”
Slower foreign growth and persistent uncertainty are also expected to weigh on profits.
While the S&P 500 remains near record highs, Deutsche Bank warned of increased volatility in the near term, saying it sees a wide trading range between 4,600 and 5,600.
“The bottom of the range corresponds to the pricing in of a typical recession decline (-25%),” analysts said. “The upper end is in line with positioning returning close to neutral.”
There is also expected to be limited upside from any near-term fiscal support, with Deutsche Bank writing that “any direct benefits for corporates [would be] dwarfed by the hit from tariffs.”
Despite the downgrade, the bank’s base case still calls for a year-end rally if trade tensions ease.
“A credible relent likely needs a significant decline in approval ratings,” the note said, suggesting a drop into the low 40s or mid-30s would be necessary to spur a policy shift.
“The risk to our view is we don’t get a relent before the nonlinearities of recession kick in,” the analysts concluded.