Fresh trade threats aren’t stopping Wall Street strategists from raising their bets on stocks.
Goldman Sachs (GS) raised its year-end S&P 500 (^GSPC) target to 6,600 late Monday, up from a prior estimate of 6,100, citing deeper Fed rate cuts, lower bond yields, and investors’ willingness to look past near-term earnings weakness.
Bank of America (BAC) followed with its own upgrade, raising its year-end S&P 500 target to 6,300 from the prior 5,600, a shift meant to catch up to what strategist Savita Subramanian described as the market’s “meteoric run.” But the new target reflects just 1.1% upside from Monday’s close, with Subramanian warning, “It’s hard to identify a positive catalyst for the S&P 500 to continue its meteoric run into Q3.”
She pointed to mixed signals from earnings guidance and economic data, adding, “The meat of corporate profits, tech company earnings, are slated to decelerate.”
The bullish revisions come as Trump reignites global trade tensions, threatening 25% tariffs on imports from Japan and South Korea. The renewed trade concerns sent stocks broadly lower on Monday.
Stocks have staged a historic comeback since Trump’s initial “Liberation Day” tariff threats in April, which briefly triggered a sharp sell-off after he pledged sweeping duties on some of the US’s largest trading partners. The White House later softened its stance, first granting a 90-day extension and then pushing the deadline again on Monday to Aug. 1.
“I’ll actually believe these [tariff] numbers when I see them,” Adam Johnson, portfolio manager at Bullseye American Ingenuity Fund, told Yahoo Finance on Monday.
He said the extension of the tariff deadline to Aug. 1 showed that the Trump administration is trying to negotiate.
“It’s the art of the deal playing out in real time,” he said. “So we throw something out there that scares everybody, gets them off guard. It’s a way of effectively trying to get a better deal from our trading partners.”
Read more: What Trump’s tariffs mean for the economy and your wallet
In other words, as Johnson was alluding to, that’s the so-called TACO trade at work, an acronym for “Trump Always Chickens Out.” The phrase captures a belief among some investors that the president often talks tough on tariffs but rarely follows through. That assumption has helped fuel a tailwind for markets in recent months as traders increasingly bet on last-minute policy pivots.
Read more: How to protect your money during turmoil, stock market volatility
But uncertainty still looms. “The shifting tariff landscape creates large uncertainty around our earnings forecasts, which are roughly in line with consensus in 2025 but below consensus in 2026,” Goldman Sachs strategist David Kostin wrote in the firm’s upgrade. “The key downside risk to our EPS forecasts is the ultimate level of tariffs and their impact on corporate profits.”
The uncertainty has been exacerbated by mixed economic signals, including a downward revision to first quarter GDP growth, a slight uptick in PCE inflation, and continuing jobless claims reaching their highest level since 2021, indicating some labor market softness.
“There are some yellow flags in the economy but no clear red flags yet,” Aditya Bhave, senior US economist at Bank of America, said on a call with reporters last week. “We’re at a fork in the road,” he said. “If something is going to break, it’s going to break soon.”
Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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