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- Why Goldman Sachs thinks stocks can power past Trump's trade war to hit fresh records</p>
<p>Jennifer SorJuly 8, 2025 at 10:33 PM</p>
<p>Tasos Katopodis/Getty Images -</p>
<p>Goldman Sachs is lifting its stock market forecast despite renewed tariff threats from Trump.</p>
<p>The bank sees the S&P 500 climbing 11% to 6,900 over the next 12 months.</p>
<p>It pointed to positive catalysts like strong earnings, Fed rate cuts, and lower bond yields.</p>
<p>President Donald Trump fanned the flames of the trade war on Monday, but fresh tariff uncertainty shouldn't stop the stock market from cruising to record highs, Goldman Sachs predicted.</p>
<p>Strategists at the bank raised their 3, 6, and 12-month price targets for the S&P 500 on Monday evening. Their forecast came hours after Trump unveiled a slew of new tariffs on other countries, which he said will kick in next month.</p>
<p>Here are the bank's new predictions for the benchmark index, compared to their former price targets:</p>
<p>3-month return: +3% (6,400, up from 5,900)</p>
<p>6-month return: +6% (6,600, up from 6,100)</p>
<p>12-month return: +11% (6,900, up from 6,500)</p>
<p>Goldman Sachs strategists think the S&P 500 could climb to 6,900 over the next 12 months.Goldman Sachs Global Investment Research</p>
<p>The bank thinks that S&P 500 companies look well-equipped to deal with the immediate impact of tariffs, once the duties take effect on August 1.</p>
<p>The median S&P 500 firm in a goods-related industry had around three months' worth of spare inventory in the second quarter, strategists said.</p>
<p>"We expect the digestion of tariffs to be a gradual process, and large-cap companies appear to have some buffer from inventories ahead of the increase in tariff rates," the bank said in a note sent to clients. "Recent company commentary shows S&P 500 firms plan to sue a combination of cost savings, supplier adjustments, and pricing to offset the impact of tariffs," they added.</p>
<p>Strategists also pointed to several catalysts they believed could take the market higher:</p>
<p>Strong earnings: While tariffs are expected to create "large uncertainty" around corporate earnings, the bank still expects earnings-per-share in the S&P 500 to grow around 7% over the next two years, strategists said, something that could offer more support to stocks.</p>
<p>Aggressive Fed cuts: Goldman Sachs economists see the Fed issuing 75 basis points worth of rate cuts for the year, followed by 50 basis points worth of cuts in 2026. That reflects a much steeper pace of rate cuts than investors are currently expecting, which could lend some positive momentum to the market.</p>
<p>Lower bond yields: Treasury yields are lower than Goldman Sachs originally expected, another bullish factor for equities. Higher bond tend to act as a headwind for stocks, as investors gravitate toward safer fixed-income assets as they dial down risk tolerance.</p>
<p>Larger companies remaining strong and investors looking past tariffs: "In addition to the improved outlook for interest rates, the strength of 1Q earnings results boosted our confidence that the largest stocks will sustain current investor expectations for their long-term growth for at least the next few quarters, helping support valuation for the aggregate S&P 500 index," strategists added.</p>
<p>Strong historical pattern: Over the last 40 years, in instances where the Fed began cutting rates after being on hold for six months and the economy avoided a recession for the next 12 months, stocks have typically gained around 10%-15% over the next year, according to Goldman Sachs' analysis.</p>
<p>In instances when the Fed cut rates after being on hold for six months and the economy avoided a recession in the next year, stocks have typically trended higher.Goldman Sachs Global Investment Research</p>
<p>"The S&P 500 recently climbed to a new record and further upside would be consistently with the historical playbook following the resumption of Fed cutting cycles," strategists said.</p>
<p>"While narrow breadth often signals the risk of larger-than-average drawdowns, we believe a 'catch up' is more likely than a 'catch down' and expect the market rally to broaden during the next few months," they added.</p>
<p>US stocks dropped sharply on Monday after Trump announced a slew of fresh tariffs in letters published on his Truth Social account, but the market reaction was more muted in Tuesday's session.</p>
<p>So far, Trump has announced fresh tariffs on 14 nations, with more tariff announcements set to be released in the coming days, according to the White House.</p>
<p>on Business Insider</p>
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