Will the Stock Market Crash or Soar in the Second Half of 2025? Wall Street Analysts Are Changing Their Answers.

Key Points

• The S&P 500 was unusually volatile in the first half of 2025 as President Trump wavered on trade policies and pushed Congress to pass the "big, beautiful bill."

• Several Wall Street analysts have recently raised their year-end targets for the S&P 500, though the median forecast implies just 1% upside from its current level of 6,260.

• Tariffs imposed by President Trump have raised the average tax rate on U.S. imports to its highest level since 1934, and that figure may increase in the coming months.

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The U.S. stock market has been unusually volatile this year as the Trump administration has made major changes to trade and fiscal policies. The S&P 500 (SNPINDEX: ^GSPC) slipped into correction territory when President Donald Trump started announcing tariffs in March, and it crashed when he unveiled "Liberation Day" tariffs in early April.

Meanwhile, White House economists claim the "big, beautiful bill" (BBB) signed into law on July 4 will reduce the federal deficit by as much as $11 trillion in the next decade. However, most independent economists vehemently disagree with that math.

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In fact, the Tax Foundation and the Congressional Budget Office estimate that the BBB will increase the federal deficit by more than $3 trillion in the next decade. Investors are worried because greater deficit spending would likely lead to higher Treasury yields that disincentivize investments in the stock market.

Nevertheless, the S&P 500 staged a historic comeback after crashing in early April, surging more than 20% during the two-month period that ended on June 9. And the index hit a record high of 6,280 in early July. Will that momentum continue in the second half of 2025? Wall Street analysts are changing their answers.

Image source: Getty Images.

Wall Street analysts are revising their S&P 500 target prices higher

Several Wall Street investment banks and research organizations have recently lifted their year-end targets for the S&P 500. Bank of America and Goldman Sachs upwardly revised their outlooks in July, following Barclay, Citigroup, and Deutsche Bank, all of which raised their outlooks in June.

"A resilient outlook for 2026 earnings growth, the resumption of Fed rate cuts, and neutral investor positioning argue for further market upside as the recent narrow rally broadens," wrote Goldman Sachs analysts last week.

Listed below are the year-end targets for the S&P 500 from 17 Wall Street institutions. The chart also shows the implied upside (or downside) versus the index's current level of 6,260.

Data source: Yahoo Finance.

As shown above, the median year-target for the S&P 500 is currently 6,300 among 17 Wall Street firms. That implies just 1% upside from its current level of 6,260 despite numerous upward revisions in recent weeks. However, the current median forecast of 6,300 is much higher than the median forecast of 5,900 in May.

Tariffs and deficit spending could still derail the bull market

The S&P 500 has returned an average of 114% during the 27 bull markets since 1929. The index has advanced 75% during the current bull market, which implies more upside in the coming months. But this bull market may end with below-average gains because tariffs and deficit spending could derail the rally.

Tariffs imposed to date have increased the average tax on U.S. imports to 18%, the highest level since 1934, according to The Budget Lab at Yale. Worse yet, that figure may rise in the coming weeks because President Trump has not yet finalized tariffs on some countries, and he has proposed a blanket tax of 15% to 20% on trading partners that do not receive an individualized tariff rate.

Additionally, the latest estimate from the Budget Lab at Yale does not account for Trump's recent threats -- namely, a 35% tariff on Canadian imports and 30% tariffs on European and Mexican imports. Those levies could be particularly harmful to the economy because the European Union (as a single entity), Mexico, and Canada are the three largest U.S. trade partners.

Here's the bottom line: While several Wall Street analysts have upwardly revised their year-end targets for the S&P 500, the median forecast still suggests the stock market will trade sideways through year-end. Yet, the possibility that tariffs are more aggressive than anticipated is a source of downside risk. Also, concerns about the "big, beautiful bill" could lead to higher Treasury yields, which would likely siphon money away from the stock market.

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