Barclays Lowers S&P 500 Target From 6600 to 5900

Barclays strategists have revised their year-end S&P 500 target down from 6600 to 5900, marking the lowest forecast among all primary U.S. Treasury dealers.

According to MarketWatch data, the median year-end projection for the S&P 500 among major institutions remains 6500. The index closed at 5776.65 on Tuesday, reflecting a 2% decline year-to-date.

Despite the lower target, Barclays does not see a deep downturn. Their base case assumes a slowdown but no recession in the U.S. economy.

"Our base case assumes earnings will take a hit as tariffs persist (higher China tariffs remain, while reciprocal tariffs on other countries average 5%). This will lead to a significant economic slowdown but not a full-blown recession, allowing valuations to gradually recover."

Barclays assigns a 60% probability to this scenario. As a result, they lowered their S&P 500 earnings per share (EPS) forecast from $271 to $262, citing weaker consumer spending and a broad economic slowdown.

"Our EPS estimate accounts for both the direct impact of tariffs (profitability hit) and secondary effects (slower growth and higher inflation)."

Sector Ratings Adjustments

Barclays adjusted its sector outlooks to reflect shifting economic conditions:

Financials: Upgraded to Positive – Regulatory easing is expected as trade tensions fade in focus.

Consumer Discretionary & Industrials: Downgraded to Negative – Consumer sentiment is deteriorating, and economic deceleration coupled with inflationary pressures will weigh on spending.

Industrials are also seen as overvalued, with investors using them as a hedge against a higher inflation scenario.

Tariff Scenarios & Potential Upside

Barclays assigns a 25% probability to Trump fully removing tariffs, which could push the S&P 500 to retest its highs at 6700.