Why Barclays Is the Latest Wall Street Bank to Slash Its 2025 Stock Market Outlook

Key Takeaways

• Barclays slashes S&P 500 year-end target to 5,900 (from 6,600), citing tariffs and economic risks.


• Consumer Discretionary and Industrials sectors downgraded; Financials upgraded on deregulation hopes.


• 40% recession risk flagged by JPMorgan; Goldman Sachs warns of tariff-driven market shock.


• Delta, FedEx, and Nike signal weakening consumer demand, amplifying growth concerns.

Barclays’ Bold Move: Cutting the S&P 500 Forecast to 5,900

On March 26, 2025, Barclays strategist Venu Krishna sent shockwaves through Wall Street by slashing the bank’s S&P 500 year-end price target to 5,900—a 10.6% reduction from its previous 6,600 forecast. The revised target reflects growing pessimism about corporate earnings, driven by:

1. Trump Administration Tariffs: New levies on imports threaten profit margins.


2. Deteriorating Economic Data: Weak retail sales, consumer sentiment, and manufacturing activity.


3. Sector-Specific Risks: Overvaluation in Industrials and slowing demand for Consumer Discretionary goods.

With the S&P 500 trading at 5,822 (-2.3% YTD), Krishna’s downgrade aligns with a broader Wall Street trend. Goldman Sachs, Morgan Stanley, and BCA Research have all trimmed targets, with recession probabilities now ranging from 40% (JPMorgan) to 75% (BCA).

Why Barclays Is Betting Against Consumer Discretionary and Industrials

1. Consumer Discretionary: A Perfect Storm of Weak Demand

• Tariff-Driven Inflation: Higher prices for imported goods squeeze household budgets.


• Falling Consumer Confidence: The Conference Board’s index hit a 12-year low in February.


• Corporate Warnings: Nike (NKE) cut its sales forecast, while Delta (DAL) and FedEx (FDX) flagged softening travel and shipping demand.

2. Industrials: Overvalued and Overexposed

• Trade Policy Uncertainty: Factories are delaying investments amid tariff threats.


• Weak Global PMIs: Manufacturing activity contracted in the U.S., Europe, and China in Q1 2025.

3. Financials: A Surprising Upgrade

• Post-Tariff Deregulation: Trump’s push to ease banking rules post-April 2 tariff rollout.


• Higher Interest Rates: The Fed’s inflation fight could widen lending margins.

The Tariff Threat: What Wall Street’s Top Voices Are Saying

Goldman Sachs: “Market Underestimates Tariff Impact”

“Investors are too optimistic about tariff exemptions. If implemented as proposed, they could shave 1.5% off GDP and trigger a 10% market correction.”

JPMorgan: 40% Chance of Recession

JPMorgan strategist Bruce Kasman highlighted:

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  Weak Retail Sales: February’s -0.8% drop vs. +0.3% expectations.

  
  


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  Business Investment Freeze: CEOs are postponing projects until tariff clarity emerges.

  
  

Sector Strategies for 2025: Where to Invest Now

1. Avoid: Consumer Discretionary & Industrials

• Vulnerable Stocks: Nike (NKE), Delta (DAL), FedEx (FDX), Caterpillar (CAT).


• Reason: Tariffs and slowing demand create earnings headwinds.

2. Buy: Financials & Defensive Sectors

• Top Picks: JPMorgan (JPM), Goldman Sachs (GS), Procter & Gamble (PG).


• Catalysts: Deregulation tailwinds and stable demand for essentials.

3. Watch: Energy and Materials

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  Wildcards: Oil prices and China’s post-tariff commodity demand.

  
  

FAQ: Your 2025 Stock Market Questions Answered

Q: Will the S&P 500 recover in 2025?
A: Barclays expects muted gains to 5,900 (-2.3% YTD), but volatility will persist until tariff clarity emerges.

Q: How do Trump’s tariffs affect my portfolio?
A: Companies reliant on imports (e.g., retailers, automakers) face higher costs. Exporters may benefit from reciprocal deals.

Q: Is a 2025 recession inevitable?
A: Not yet—strong labor markets could offset weakness. But JPMorgan’s 40% risk suggests caution.

The Bottom Line: Navigating a High-Risk Market

• Reduce exposure to tariff-sensitive sectors.


• Focus on defensive stocks with pricing power.


• Monitor April 2 for Trump’s tariff implementation details.