HSBC is the latest bank on Wall Street to cut its S & P 500 year-end forecast, citing tariff uncertainty that continues to challenge business. Nicole Inui, head of equity strategy of the Americas, slashed her S & P 500 year-end target by more than 16%, to 5,600 from 6,700. The new forecast implies the broad market index will end the year about in line with where it is currently, meaning just a 1% move above Monday’s close of 5,528.75. “We revise down earnings expectations,” the strategist wrote. “While our base case remains no recession/no stagflation, GDP growth is expected to slow considerably (1% Q4/Q4) … and increased uncertainty should cap valuations.” Inui, who came to HSBC after stints at Bank of America and McKinsey & Co., cut her S & P 500 earnings estimate for this year by 5% to $255, a below-consensus forecast that implies just 6% annual growth. The more bearish view out of HSBC comes as U.S. investors continue to deal with the fallout from President Donald Trump’s revamped tariff policy, especially on important trading partners such as China that investors worry will hurt supply chains and start to delay shipments. Earlier Tuesday, the Port of Los Angeles said shipping volume will plummet 35% next week as China tariffs start to bite. To cope, Inui said investors should position defensively, noting that times of great uncertainty historically coincided with pullbacks of as much as 25%, while a severe recession can result in a 30% drop from the market’s peak. Staples and health care outperform in a recession, she noted, while commodities and health care do well in periods of stagflation, when inflation stays elevated and growth slows to a crawl. “We expect the market narrative will flip-flop between recession and stagflation until tariff turmoil subsides, the Fed starts easing, and/or inflationary pressures fail to build up,” Inui wrote. “While we expect a Fed cut in June, concerns on tariffs/inflation could take some months to ease.” The new HSBC target is among the lowest on the Street, even after several strategists cut their stock outlooks to account for higher tariffs, CNBC’s 2025 Market Strategist survey shows. Bank of America Merrill Lynch recently cut its forecast to 5,600 after starting the year at 6,666. Goldman Sachs slashed its forecast to 5,700 from 6,500.
