🔹 Goldman Sachs’ Chief US Equity Strategist David J. Kostin flags tariffs as a key downside risk for the S&P 500 earnings forecast in 2025.
🔹 Q4 2024 Earnings: The S&P 500 saw 12% YoY growth in earnings per share (EPS), surpassing expectations of 8%—but new tariffs could harm future earnings.
🔹 Tariff Increases Ahead: Goldman projects: 🔻 +10 pp on Chinese imports (on top of a 10 pp hike already implemented); 🔻 +10 pp on global critical imports; 🔻 +25 pp on EU autos
🔹 Impact on Earnings: A 5 pp increase in tariffs could reduce S&P 500 EPS by 1-2%. Corporate margins could be squeezed, but many companies plan to pass costs onto consumers. However, how much more will consumers accept higher prices? 📉💰
🔹 Market Impact: Increased policy uncertainty could drive a higher equity risk premium, putting downward pressure on valuations. ⚠️📉
🔹 Goldman’s Outlook: Despite risks, Goldman remains bullish, forecasting a +7% increase for the S&P 500, targeting 6500 by year-end. 🚀📈
🔹 2025 Trends:
✅ The earnings growth gap between the ‘Magnificent 7’ and other companies is narrowing.
✅ Continued corporate investment strengthens US economic exceptionalism.
✅ AI evolution continues from infrastructure to enabled revenues.
🏆 The Magnificent 7 have driven growth, but now more companies are contributing to the earnings rally. Can it continue? 🤔
