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S&P 500 Slides Into Bear Market as Tariff Policies and Rate Stance Weigh on Outlook

The index has fallen over 20% from its peak, with analysts forecasting further declines driven by trade tensions and reduced corporate earnings expectations.

The New York Stock Exchange building is seen from Wall Street in Lower Manhattan in New York, January 20, 2016. REUTERS/Mike Segar/File Photo
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Overview

  • The S&P 500 closed at 5,074 on Friday, officially entering a bear market after falling more than 20% from its record high in mid-2024.
  • Morgan Stanley projects the index could drop to 4,700, reflecting a further 7%-8% decline, citing trade tariffs and the Federal Reserve's steady interest rate policy.
  • Bank of America and Oppenheimer have lowered their year-end targets for the S&P 500 to 5,600 and 5,950, respectively, reflecting reduced corporate earnings expectations.
  • Trade tensions with China and Canada are expected to erode U.S. corporate profitability, with Bank of America estimating a 9% earnings reduction from Chinese tariffs and an additional 1% from Canadian tariffs.
  • Analysts highlight the role of potential policy shifts, including softened trade measures or monetary easing, in determining the market's trajectory and investor confidence.