By Ian Salisbury

Investors have rapidly been losing faith in the stock market -- one of Wall Street's most prominent bulls just joined their ranks.

In a note Thursday morning, Yardeni Research, a widely respected and closely watched independent research firm, which spent much of the past year cheering on and defending the bull case for U.S. stocks, lowered its 2025 "best case" S&P 500 price target to 6400 from 7000.

The move caps one of the roughest months for stocks in more than two years. The S&P 500, which hit a record high of 6144 as recently as Feb. 19, has since tumbled 9.4%, including a decline Thursday, when the index was down 62 points, or about 1%, to 5539.

Yardeni's forecast is still relatively optimistic. It suggests stocks, now down about 5% year to date, will claw their way back, finishing 2025 up 8% from where they started in January. However, that is far less bullish than the previous forecast, which called for a 18% full-year gain. To put that in broader context, the S&P 500's historical average gain going back to 1926 is about 10%.

In its note Thursday, Yardeni didn't mince words about who was responsible for the market's sell off. "We continue to bet on the resilience of the economy," Yardeni wrote. "However, we acknowledge that it is being severely stress-tested now by Trump 2.0's tariff turmoil and shotgun approach to paring the federal workforce."

Yardeni is hardly a reflexive Trump critic. In fact, the firm made headlines shortly after his November election victory by forecasting the S&P 500 could hit 10,000 by the end of the decade and proclaiming, "animal spirits are back."

Yardeni didn't immediately respond to an email about the November call but said in Thursday's note that the firm, along with others, misread how serious Trump was about tariffs.

"Perhaps the biggest surprise is that President Donald Trump wasn't bluffing or even just exaggerating when he often said during his presidential campaign rallies that he loves tariffs," Yardeni wrote. "The widespread assumption was that his constant threat to raise tariffs was mostly a negotiating tool to force America's major trading partners to lower their tariffs."

Yardeni, which added that it remains broadly optimistic about the U.S. economy, isn't the only firm to slash its market outlook recently. On Tuesday, Goldman Sachs analyst David Kostin lowered his 2025 S&P 500 target to 6200 from 6500.

Kostin blamed slower expected economic growth, higher tariff rates, and additional uncertainty. "In the past, sharp increases in economic policy uncertainty have typically been associated with a widening equity risk premium, and this pattern has been repeated recently," Kostin wrote.

One irony: While Wall Street forecasters have been lowering market targets, they may not be acting fast enough.

Stocks have been selling off so quickly, that, from one perspective, the average Wall Street forecast has actually gotten more, not less, bullish over the past several weeks noted independent market watcher Jim Paulsen in a note Thursday.

Right now, the average Wall Street price target is about 15% above the current level of the S&P 500, Paulsen notes -- suggesting analysts are predicting a 15% market gain by December.

Based on that, analysts appear to be more bullish than they have been about 90% of the time going back to 1999, Paulsen notes.

By the same light, analysts actually appear significantly more bullish than they were when the S&P 500 hit its all time high on Feb. 19. On that day, the average analyst forecast implied only a 7.5% further gain by year end, according to Paulsen.

Of course, that's not likely to be the case. More likely: Investors will soon see additional research shops follow Goldman Sachs and Yardeni's lead and lower 2025 forecasts. "Wall Street target prices have not YET adjusted," Paulsen wrote.

Write to Ian Salisbury at ian.salisbury@barrons.com

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March 13, 2025 12:10 ET (16:10 GMT)

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