Wall Street Analysts Are Slashing Their S&P 500 Targets for 2025. Here's What You Should Do, Based on Decades of History.

The S&P 500 (^GSPC 0.58%) is coming off back-to-back annual returns of more than 25% in 2023 and 2024. Investors have only seen such a strong two-year run on one other occasion since the index was established in 1957, and that was in 1997 and 1998, during the dot-com bubble.

Most Wall Street analysts came into 2025 expecting the S&P 500 to deliver another strong return, until President Donald Trump unveiled heavy tariffs on imported goods from virtually all of America’s trading partners. Investors immediately feared these new taxes could trigger inflation and an economic slowdown, so they flocked to safe assets like cash. The flight from risk sent the S&P plunging by as much as 19% from its record high, and though it has recovered some ground since then, it’s still down by around 8% as of this writing.

A long list of Wall Street banks and investment firms have since slashed their S&P 500 target for 2025. But history offers some clear guidance for navigating stock market corrections, so here’s what investors might want to do next.

Wall Street isn’t a fan of tariffs

President Trump placed sweeping 10% tariffs on all physical products imported into America from anywhere — those went into effect on April 5. He also imposed higher “reciprocal tariffs” on countries that have large trade surpluses with the U.S., but he recently paused them to pave the way for negotiations (except for his 145% tariffs on Chinese imports, which remain in place).

His stated goal is to encourage companies to manufacture more of their products in America, but even if his strategy works, it could take years to begin to bear fruit. In the meantime, American consumers will be stuck paying higher prices on many of the goods they buy, which could have downstream effects on businesses and supply chains, and could trigger a recession.

That would be a recipe for poor corporate earnings, and since earnings are the primary driver of stock performance, it’s no surprise Wall Street analysts are lowering their end-of-year predictions for 2025. Nicole Inui from HSBC is the latest analyst to issue a revision — she came into the year predicting the S&P 500 could reach 6,700, which implied a return of 14%. Last week, she slashed that estimate to 5,600, which is lower than where it began the year. She isn’t alone:

• Oppenheimer recently slashed its 2025 S&P 500 forecast from 7,100 to 5,950.
• Yardeni Research cut its target from 7,000 to 6,400, and then again to 6,000.
• Goldman Sachs revised its estimate from 6,500 to 6,200, and then down to 5,700.
• RBC Capital Markets lowered its estimate from 6,600 to 5,500.
• Barclays reduced its target from 6,600 to 5,900.
• UBS trimmed its target from 6,400 to 5,800.

The S&P 500 closed 2024 at a price of 5,881, so the revisions from HSBC, Goldman Sachs, RBC Capital Markets, and UBS imply the index will end this year with a loss.

Stock market sell-offs are a normal part of investing

The S&P 500 was down by as much as 19% from its all-time high recently, just shy of the bear market threshold of 20%. But bear markets aren’t exactly rare — the S&P 500 suffers a decline of 20% (or more) every six years, on average. Corrections of at least 10% are even more frequent, occurring, on average, every two and a half years or so.

This might sound controversial, but history suggests that the causes of a stock market decline aren’t really that important. Tariffs might be the trigger this time, but the S&P 500 plunged into a bear market four times over the past 25 years, on the back of four completely different economic shocks:

• The bursting of the dot-com bubble in 2001.
• The global financial crisis in 2008.
• The COVID-19 pandemic in 2020.
• The inflation surge in 2022.

The S&P 500 also fell by 19.8% in 2018, and Trump-imposed tariffs were the trigger on that occasion, too. He mandated five sets of levies affecting around 12.6% of all U.S. imports that year, which left investors fearing a global trade war and a recession. However, many of America’s trading partners negotiated trade deals that spared their exports from those taxes, leading to a market recovery. In fact, the S&P 500 surged by 31.5% in 2019.

Here’s the bottom line: The S&P 500 has delivered compound annual returns of 10.3% since it was established in 1957, even after accounting for every sell-off, correction, and bear market. The latest bout of tariff turmoil is unlikely to derail that trend, so long-term investors might want to take this decline in the S&P as a buying opportunity.