Bank of America (BAC) equity and quantitative strategist Savita Subramanian has revised the year-end target for the S&P 500 index (SPX) down to 5,600 from 6,666, citing the negative impact of President Trump’s recently announced tariff plans on market sentiment. This revision follows a sharp decline in stock markets due to the recently proposed tariffs.
Based on the S&P 500’s current level of around 5,000, the revised target implies a potential upside of 12%.
While setting a lower base target, Subramanian predicts that the S&P 500 could range from 4,000 to 7,000, depending on future earnings, interest rates, and policy changes. She warned that government debt makes major fiscal rescue efforts less likely, unlike past downturns when private sector debt was the main issue.
BAC Predicts Flat Earnings Growth for SPX
BofA’s strategist also noted that the recent tariffs imposed by the U.S. on key trading partners, such as China and Canada, have escalated global trade tensions and are likely to lower operating income for companies within the index.
She estimates a 9% hit to operating income due to U.S.-China tariffs. Further, tariffs on Canada are expected to impact another 1% of earnings, with additional pressure from potential European Union countermeasures.
These developments have led to a downward revision of the S&P 500’s earnings per share (EPS) forecast for 2025, now projected at $250 with flat growth compared to current levels.
Subramanian Says Market Surges Often Follow Big Declines
Despite the bearish change, Subramanian highlighted the benefits of long-term equity investment, even during periods of major market volatility.
She said that the best trading days often come right after the worst ones. Since the 1930s, the periods just before the 10 best trading days in each decade typically saw drops of over 10%. Missing those top 10 days would significantly reduce investment returns.
How Do I Invest in the S&P 500 Index?
Investing in the S&P 500 index can be done in several ways, with one of them being through ETFs (exchange-traded funds). These funds replicate the performance of the index and are cost-effective.
Some of the ETFs that provide exposure to the S&P 500 index are SPDR S&P 500 ETF Trust (SPY), iShares Core S&P 500 ETF (IVV), and Vanguard S&P 500 ETF (VOO).
According to the TipRanks ETF Comparison tool, all three ETFs have a Moderate Buy consensus rating and have an upside potential of over 35%.
