UBS Strategist Warns U.S. Corporate Earnings May See Zero Growth by 2025 Due to Trump Tariffs

UBS's Chief Investment Strategist has warned that U.S. corporate earnings could face zero growth by 2025, primarily due to the impact of tariffs imposed by former U.S. President Donald Trump. The strategist, Bhanu Baweja, highlighted that a 1% decrease in GDP growth typically results in a 6.9% decline in earnings growth. This suggests that the current economic environment could lead to stagnant or even negative earnings growth for U.S. companies.

Baweja's concerns are rooted in the historical data and the current economic climate. He noted that the market sentiment is extremely poor and that the situation could worsen before it improves. The strategist also mentioned that the market has not yet reached its estimated lowest price-to-earnings ratio, indicating that there is still room for further decline.

Baweja's predictions come at a time when analysts have been rapidly adjusting their forecasts for the S&P 500 index. Initially, analysts had predicted an 11.2% growth in earnings for the index by 2025, which is lower than the 14.4% growth predicted at the beginning of the year. The strategist's warnings have added to the market's volatility, with the index experiencing significant fluctuations in recent weeks.

Despite the market's volatility, Baweja believes that any signs of a softening in Trump's tariff stance could reset the market's outlook. He emphasized that the situation is highly dependent on Trump's personal decisions, and any change in his stance could significantly alter the market's trajectory. However, he also cautioned that it is difficult to predict when such a change might occur, and the situation could worsen before it improves.