Goldman Sachs Cuts STOXX 600 Forecast by 10 Points Amid Trump Tariff Fears

Goldman Sachs has revised its 12-month forecast for the European benchmark STOXX 600 index, lowering it from 580 points to 570 points. This adjustment comes in response to the potential impact of U.S. President Donald Trump's tariff plans, which have raised concerns about a global economic slowdown. The announcement by Trump that tariffs would be applied to all countries has exacerbated these concerns, leading to a significant drop in European stock markets. The STOXX 600 index experienced a notable decline, closing at its lowest level in two months. This decline was driven by cautious investors fleeing riskier assets in favor of safer havens.

The market's reaction underscores the growing unease over the economic implications of Trump's tariff policies, which are seen as a major risk to global economic growth. The uncertainty surrounding these policies has led to a shift in investor sentiment, with many now seeking refuge in assets that are traditionally seen as safe havens during times of economic turmoil. The impact of these tariffs is expected to be felt across various sectors, with particular concern for industries that rely heavily on international trade.

Goldman Sachs also revised its forecast for European earnings per share, predicting growth of 2% and 4% for 2025 and 2026, respectively. This is a reduction from the previous estimates of 4% and 6%. However, the firm noted that the region is less likely to be significantly impacted due to planned increases in fiscal and defensive spending over the next two to three years. The firm also increased the probability of a U.S. economic recession from 20% to 35% and now expects the Federal Reserve and the European Central Bank to cut interest rates three times this year, up from the previous expectation of two cuts each.

Goldman Sachs highlighted that cyclical sectors, such as the German DAX, MDAX, and Nordic markets, are the most sensitive to trade uncertainty and global trade growth. In contrast, defensive sectors, the FTSE 100, and the SMI (Swiss Market Index) are the least sensitive. The firm also raised its 12-month forecast for the UK's benchmark FTSE 100 index from 9,000 points to 9,100 points, reflecting a more optimistic outlook for the British market despite the broader concerns about global trade tensions.