Barclays Cuts S&P 500 Forecast Amid Trade Tensions

Tariffs are expected to weigh on U.S. market earnings, raising concerns about a significant slowdown in economic activity—though not necessarily a full-blown recession.

Wall Street has felt the impact of Donald Trump’s trade policies, as international trade restrictions have heightened recession fears. As a result, Barclays analysts have lowered their S&P 500 forecast for 2025.

Currently, the S&P 500 hovers around 5,800 points. The index has lost 3% over the past month and is already down 10% from its all-time highs.

Different Scenarios: What Could Happen to the S&P 500?

“Our base case assumes that earnings take a hit as tariffs—higher levies on China remain but do not escalate, while reciprocal tariffs rise to 5% for the rest of the world—contribute to a material slowdown in U.S. economic activity. However, this does not lead to a direct recession, allowing valuations to recover gradually,” Barclays analysts noted.

In a bullish scenario, political and industrial pressure could push Trump to reconsider his tariff plans. If this happens, Barclays estimates that the S&P 500 could climb to 6,700 points.

On the other hand, in a bearish scenario, the index could drop to 4,400 points. However, Barclays sees this as a less likely outcome.

“The financial sector could benefit as monetary policy focus eventually shifts away from trade and potentially toward deregulation,” Barclays explained.

Conversely, the firm downgraded the consumer discretionary and industrial sectors from “neutral” to “negative” due to weakening consumer confidence. “Industrials appear expensive relative to their historical valuations and are exposed to both trade policy and a fragile manufacturing PMI,” they added.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

Related Articles