Over recent weeks, several major financial institutions have lowered their targets for the S&P 500, reacting to recent U.S. tariff announcements. A broader market uncertainty has emerged, with the S&P 500 dropping over 7% since early April, and 14% from its February high, as investors adjust to unpredictable policy shifts.
Strategists have revised their year-end S&P 500 target to 6,012 from a previous 6,539, despite a current level of 5,283. The projected annual growth for 2025 has also decreased to 2%. Notably, Citi adjusted its 2025 target to 5,800 from 6,500 and its EPS projection to $255 from $270, reflecting a dramatic change in market sentiment.
Bear Market Fears
With these developments, the concerns now revolve around whether a bear market could ensue, not due to traditional factors, but from U.S. administrative actions. Analysts are realigning their positions as policy risks create volatility, suggesting a shift from prior optimism to caution.
Despite the bleak outlook, some remain cautiously optimistic, eyeing a weaker dollar as potentially beneficial for the market. There is a belief in a possible Fed intervention if necessary, providing a degree of support. Nonetheless, market dynamics remain unpredictable, with the consensus shifting rapidly in response to ongoing events.
The past few weeks have brought a sharp pivot in sentiment across the broader U.S. market, led primarily by abrupt shifts in trade policy which have spooked investors and pressed institutions to reassess fair value projections. When large-scale players such as Citi mark down their S&P 500 targets by over 700 points for next year, it reflects more than a passing reaction—it suggests a meaningful revaluation of the risk picture. There’s less appetite now for assumptions that were previously built on steady policy and earnings growth narratives.
Now, what this essentially means is that the market is no longer reacting simply to economic indicators or company performance, but rather to political recalibrations. The 7% decline in the S&P 500 since April can’t be chalked up to earnings misses or inflation figures. It reveals an underlying concern: government action has entered as a dominant driver of uncertainty. The cut from 6,539 to 6,012 in year-end index forecasts is not subtle. That kind of revision suggests the floor beneath current valuations is less stable than thought, and the usual reasoning behind past bullishness—strong corporate profits and resilient demand—has been discounted.
We have to adjust expectations. No longer can we assume the Federal Reserve or macroeconomic momentum will simply lift all sectors simultaneously. What stands out in Citi’s downward revision of earnings per share from $270 to $255 for next year is how quickly forward-looking assumptions have withered. There’s less oxygen in the room now for equities to breathe, and fewer narrative threads holding the optimistic case together.
Portfolio Adjustments
As a result, our approach has shifted from leverage-seeking to risk-honing. Where there was once a belief in a long runway for gains, cushions are beginning to emerge beneath portfolios instead—put protection, smaller delta exposure, hedged spread structures. That kind of pivot doesn’t arise unless positioning is already strained.
One thing keeping this from full-blown panic, however, is the softening in the dollar. A weaker USD tends to lift multinationals, as overseas revenue becomes more valuable when repatriated. But traders must be careful not to lean too heavily on this counter-force. It’s supportive, yes, but not enough to galvanise a new bull leg on its own.
There’s still some ambient hope that the Fed, should price stability remain intact, would act to support financial conditions if matters deteriorate further. Some participants are anchoring to that as a backstop. But even with that theoretical floor, the market has begun punishing complacency. Positions are becoming shorter in duration, and trade ideas now carry less exposure to single-event risks.
At the desk, we’re seeing less of the broad-market SPX upside call spreads that dominated in Q1, and more sector-rotation hedges—particularly targeting industrials and export-linked segments. That tracks with the sense that much of the current stress is front-loaded into international positioning, driven by higher geopolitical friction.
We would advise aligning exposures with more idiosyncratic catalysts. It’s not a market rewarding passive allocation anymore—it’s about who avoids the policy whipsaw, not who rides the mean reversion. Make peace with the idea that volatility is now a semi-permanent fixture in benchmark pricing, at least through year-end. Timing directional trades will require tact, as dispersion increases and collective confidence ticks down another notch.
