JPMorgan Chase Predicts 1% S&P 500 Gain by 2025 Amid Trade Uncertainty

JPMorgan Chase has recently reversed its outlook on the U.S. stock market, now predicting a slight increase by 2025. This shift comes despite the ongoing uncertainty surrounding President Donald Trump's trade policies, which have been a significant factor in market volatility. The bank's chief equity strategist, Dubravko Lakos-Bujas, had previously forecasted that the S&P 500 index would drop to 5,200 points by the end of 2025. However, he has since revised this prediction, now expecting the index to close at 6,000 points this year, which is a less than 1% increase from the closing price on Thursday. This new outlook is more optimistic compared to his previous predictions, as the index has already seen double-digit gains since hitting a low on April 8.

JPMorgan Chase is not the only institution to have changed its stance on the market. Prior to this, Goldman Sachs, Deutsche Bank, and Barclays had also adjusted their views. Lakos-Bujas, in a report to clients on Thursday, stated that the most likely scenario, barring any major policy surprises, is for the market to reach new highs. He cited several factors that could support this upward trend, including the steady buying of systematic strategies as volatility and momentum signals improve, as well as the inflow of funds from active fund managers buying on dips.

In early April, the S&P 500 index experienced a significant drop of 12% over five trading days following Trump's announcement of comprehensive tariffs on most major economies. However, the market stabilized after Trump announced a 90-day pause on these tariffs. Since then, the market has continued to rise, with the S&P 500 index now only about 2% away from its historical high. Recent economic data suggests that the U.S. economy has not yet felt the impact of the tariffs. On Friday, strong employment data further boosted the market, indicating a robust labor market.

The tariff turmoil in early April had raised concerns about the potential impact of the trade war on U.S. economic growth. At that time, Lakos-Bujas was not the only strategist to lower their expectations. In fact, sell-side strategists were downgrading their S&P 500 index forecasts at the fastest pace since the outbreak of the COVID-19 pandemic in 2020. This reversal highlights the challenges of predicting market movements in an environment dominated by Trump's unpredictable economic policies.

Lakos-Bujas noted that JPMorgan Chase expects a short squeeze in the market as institutional investors, who sold stocks to corporations and retail investors during the April panic, begin to chase prices higher. He also believes that the market's leadership will shift back to the large technology companies that have been driving the bull market. The bank is most confident in momentum stocks, particularly the seven tech giants, semiconductors, and other companies benefiting from artificial intelligence.

However, Lakos-Bujas also warned of potential downside risks, including the possibility of an economic slowdown in the second half of the year and high stock valuations. He wrote, "However, if this also accelerates the Federal Reserve's easing timeline, the market may ignore economic weakness, and lagging sectors—cyclical stocks, small-caps—will at least temporarily recover."