Our New S&P 500 Earnings & Price Targets Under Trump's Reign Of Tariffs

Yesterday, we reduced the odds of our Roaring 2020s base-case scenario from 65% to 55% and raised the odds of a stagflationary scenario from 35% to 45%. The latter includes the possibility of a shallow recession later this year, following a buy-in-advance shopping spree during April and May. We did so because Trump's Reign of Tariffs imposed a 25% permanent tariff on imported autos and auto parts last week (effective April 3), the same rate as on imported steel and aluminum (effective March 12). That will raise auto-related prices and costs for consumers and depress auto sales (after a short buying binge). That's just one example of how Trump's tariffs are likely to be increasingly stagflationary later this year. The latest development in the Reign of Tariffs is that Trump wants a 20% tariff on all goods imported from all countries.

We still expect that the Roaring 2020s scenario will prevail over the remainder of the decade, as it has so far, but after six to 12 months of heightened stagflationary risks for now. So we are lowering our outlook for S&P 500 earnings per share and our S&P 500 stock price targets for 2025 and 2026. We are still targeting 10,000 for the S&P 500 by the end of the decade.