The U.S. financial markets are facing challenging conditions as investors receive no support from either the Trump administration or the Federal Reserve. President Donald Trump has made it clear that he will not intervene to stabilize the stock market, even if his aggressive trade policies lead to a recession. Meanwhile, Fed Chair Jerome Powell is prioritizing the fight against inflation, effectively ruling out any immediate monetary policy easing.
As a result, financial markets are experiencing declines. Major indices such as the S&P 500, Dow Jones, and Nasdaq are under pressure, while the Russell 2000 has approached bear market territory, losing nearly 20% from its recent highs. The uncertainty surrounding Trump’s trade policies is negatively impacting business investments and consumer spending, increasing the risk of an economic slowdown. In this environment, Wall Street analysts are lowering their forecasts for the S&P 500. Goldman Sachs has reduced its year-end 2025 projection to 6,200 points, while Yardeni Research has lowered its optimistic estimate to 6,400 points. The average analyst forecast for the index at the end of the year stands at 6,607 points, reflecting a 17% increase from its current level of 5,638.94.
The Fed remains cautious and is in no hurry to adjust interest rates. Markets predict with 99% certainty that the central bank will leave rates unchanged at its upcoming meeting on Wednesday. Investors are also eagerly awaiting the FOMC’s economic projections, which will include inflation and economic growth forecasts, potentially shaping market expectations for future monetary policy decisions.
Stock market performance has been weak since the beginning of the year—S&P 500 has fallen by 4.2%, Dow Jones by 2.5%, and Nasdaq by 8.1%. While analysts remain cautious, they do not foresee panic. RBC Capital Markets maintains its forecast for the S&P 500 at 6,600 points but warns of a potential correction in the range of 14-20%, which could push the index down to 5,775 points. J.P. Morgan projects 6,500 points but suggests this level may not be reached until 2026. Meanwhile, Citigroup has downgraded its recommendation for U.S. equities from “overweight” to “neutral.”
The average price-to-earnings (P/E) ratio for the S&P 500 has declined from 21.6 at the start of January to 19.9, indicating increased investor caution. Despite negative sentiment, markets have managed to recover some losses. On Friday, the S&P 500 rose by 2.1%, the Dow Jones by 1.7%, and the Nasdaq by 2.6%. However, despite the rebound, the Dow ended its second consecutive week in negative territory, while the S&P 500 and Nasdaq recorded their fourth consecutive weeks of losses.
Krzysztof Kamiński – Oanda TMS
Source: ManagerPlus
