From fanaticism to caution! Trump's policy overturns the bull market script and Wall Street urgently reassesses US stock expectations.

Over the past two years, stock market forecasters have continuously raised their expectations for the S&P 500 index to keep up with the continuous market uptrend. However, in less than three months into this year, companies including Morgan Stanley and RBC Capital Markets are cautious about their bullish expectations for 2025. This is due to concerns about the economic growth slowdown triggered by US President Trump's tariff policies, leading to turbulence in the US stock market. Although forecasters have not explicitly lowered their expectations yet, the change in sentiment following the S&P 500 index reaching new all-time highs in less than three weeks shows the increasing uncertainty among Wall Street forecasters. According to analysis by Piper Sandler & Co., historically, strategist consensus targets tend to lag market trends by about 60 days. Morgan Stanley strategist Dubravko Lakos-Bujas wrote in a report to clients, "The timing, scope, and depth of policy changes remain unclear, making a comprehensive assessment of potential policy downside risks still difficult. During this period, investors should accept volatility." His team warned last Thursday that their forecast for the S&P 500 index reaching 6500 points by the end of the year - an increase of about 13% from the closing price last Friday - may not be achieved before December due to "substantial standard error" around this number and increasing uncertainty. Piper Sandler's Chief Investment Strategist Michael Kantrowitz said, "I don't think anyone is more certain today: uncertainty has increased, and the range of outcomes has widened." Lakos-Bujas stated that the S&P 500 index could fluctuate between its initial year-end forecast value and as low as 5200 points for the full year of 2025. This cautious stance is in stark contrast to earlier this year when the bank and other major investment banks expected the stock market to steadily rise in the coming months as Trump policies seen as "growth-promoting," such as deregulation, tax cuts, drove the market. A once strong uptrend even led Morgan Stanley's Michael Wilson, one of the stock market's well-known bears until mid-2024, to turn bullish. The strategist still expects the S&P 500 index to rise to 6500 points by the end of 2025. However, optimism among forecasters has cooled due to tariffs on trade partners such as Canada, Mexico, and China, since Trump took office, the US stock market has experienced a difficult period, with the benchmark index falling in five of seven weeks, and the Nasdaq 100 index falling into correction territory last Friday. Wilson is cautious, suggesting that the US stock market could fall another 5% due to concerns about the impact of tariff policies on corporate earnings and reduced fiscal spending. He expects the S&P 500 index to fall to a low of around 5500 points in the first half of this year before rebounding. "This process may be volatile as the market continues to digest these growth risks, which may deteriorate further before improving," Wilson said. The strategist also warned that if the economy enters a recession, the benchmark index could fall by 20%. "We are not at that point yet, but the situation could change rapidly, so understanding downside risks in a bear market is helpful for risk management." Morgan Stanley's trading desk has also shifted to a tactical bearish stance, forecasting a significant downward revision in GDP expectations, profit adjustments, and, most importantly, a need for Wall Street to reevaluate year-end forecasts for the S&P 500 index. RBC Capital Markets' Lori Calvasina has lowered her bearish forecast for the S&P 500 index from 5775 points to 5600 points based on a new stress testing model, which now reflects flat corporate earnings and different inflation and interest rate scenarios. Calvasina said in a report to clients, "The post-election bullish sentiment is an important part of the consensus bullish view for the US stock market in 2025, but this consensus is facing pressure." She also asserts that there is a rising risk of "growth panic" in the S&P 500 index - defined as a decline of 14% to 20%. Despite this, strategists including Calvasina are currently sticking to their year-end targets for the S&P 500 index, as the latest employment data and comments from Federal Reserve Chairman Powell indicate that the economy remains robust. Powell said last Friday that the Fed does not need to rush to adjust monetary policy. According to a compiled forecast survey, Wall Street's average expectation is for the S&P 500 index to close above 6500 points by the end of 2025.