š¹ Goldman Sachsā Chief US Equity Strategist David J. Kostin flags tariffs as a key downside risk for the S&P 500 earnings forecast in 2025.
š¹ Q4 2024 Earnings: The S&P 500 saw 12% YoY growth in earnings per share (EPS), surpassing expectations of 8%ābut new tariffs could harm future earnings.
š¹ Tariff Increases Ahead: Goldman projects: š» +10 pp on Chinese imports (on top of a 10 pp hike already implemented); š» +10 pp on global critical imports; š» +25 pp on EU autos
š¹ 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? šš°
š¹ Market Impact: Increased policy uncertainty could drive a higher equity risk premium, putting downward pressure on valuations. ā ļøš
š¹ Goldmanās Outlook: Despite risks, Goldman remains bullish, forecasting a +7% increase for the S&P 500, targeting 6500 by year-end. šš
š¹ 2025 Trends:
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The earnings growth gap between the ‘Magnificent 7’ and other companies is narrowing.
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Continued corporate investment strengthens US economic exceptionalism.
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AI evolution continues from infrastructure to enabled revenues.
š The Magnificent 7 have driven growth, but now more companies are contributing to the earnings rally. Can it continue? š¤
