Barclays Raises S&P 500 Target 15% to 6,050 by 2025

Barclays has revised its target for the S&P 500 index, setting a new goal of 6,050 points for 2025. This adjustment comes as the bank anticipates a recovery in earnings per share (EPS) growth by 2026, following the impact of tariffs in 2025. The primary rationale behind this move is the belief that the peak of trade policy uncertainty may have passed, allowing for a slight increase in valuation. Barclays expects that as companies adapt to the effects of tariffs on their earnings, the market will see a modest expansion in valuation metrics.

Despite this optimistic outlook, Barclays acknowledges that the year-to-date earnings per share have not yet felt the full impact of new tariffs. Concerns over the U.S. fiscal outlook and high interest rates pose risks, potentially leading to a decline in consumer spending. These factors constrain Barclays' valuation assumptions, and the bank has maintained its 2025 EPS forecast at $262. The bank's analysis considers various tariff scenarios and their potential impact on EPS, using industry-level trade and output data to estimate the drag on earnings from different tariff levels imposed on regions such as China, Europe, Canada, Mexico, and others.

Looking ahead to 2026, Barclays projects an EPS of $285, slightly below the market consensus of $301. The bank anticipates that the S&P 500 index will reach 6,700 points by the end of 2026, as earnings growth recovers from the tariff shock experienced in 2025. While new direct impacts from tariffs are not expected in 2026, the secondary effects on growth and inflation could persist, potentially leading to a slight softening in consumer spending compared to long-term trends.

Barclays' sector recommendations remain unchanged, with a positive stance on the financial sector due to factors such as a steepening yield curve, delayed rate cuts, and potential regulatory easing. The bank also favors the healthcare sector, citing attractive valuations, strong EPS growth prospects, and potential benefits from increased merger and acquisition activity. Additionally, Barclays maintains a positive view on large-cap technology stocks, noting that key growth drivers remain intact for the first quarter of 2025.