Wall Street's outlook on the U.S. stock market for the second half of this year is becoming increasingly optimistic. The market experienced significant volatility in the first half due to President Donald Trump's high tariffs and increased expenditure policies, but the Standard & Poor's (S&P) 500 index has recently broken its all-time high and continues to rebound.
The S&P 500 plummeted after the announcement of the 'Liberation Day tariff' in early April, but it rebounded more than 20% over the two months until the 9th of last month. In early July, it surpassed 6,280, setting a new all-time high. Consequently, major investment institutions on Wall Street have raised their year-end target for the S&P 500.
Wells Fargo set the target at 7,007, while Goldman Sachs and Deutsche Bank projected 6,600. Some institutions, including Barclays and HSBC, predicted a decline, but the median target for the year-end among the total of 17 institutions was 6,300, suggesting a 1% increase potential from the current level (6,260).
The backdrop for the market rebound is the assessment that the tariff shock was more limited than expected. According to a survey of economists conducted by The Wall Street Journal (WSJ), the price increases caused by tariffs were not as significant as originally worried, and the recent core consumer price index rose to 2.8%, marking the lowest rate in four years.
The Yale University Budget Institute and JPMorgan analyzed that the current average tariff rate in the U.S. is around 18%, and if the additional tariffs promised by President Trump are fully implemented, there is a possibility of an increase of up to 6 percentage points. However, most corporations and consumers are assessed to be responding by pre-emptively factoring in the tariff impacts.
Indicators of employment and growth are also showing improvement. American economists have lowered the likelihood of a recession this year to 33%, which is a decrease of 12 percentage points from the April estimate (45%). Recently, job growth has averaged over 150,000, supporting the recovery trend.
However, downside risks remain. Rising Government Bond yields, expanded federal fiscal deficits, and the possibility of additional tariffs are identified as variables that could hinder the stock market. There are also concerns that the 'Big and Beautiful Bill (BBB)' pushed by President Trump could increase the federal deficit to $11 trillion.
The Federal Reserve's interest rate cuts are also a key variable that will determine the market's direction. Economists expect that 1 to 2 rate cuts of around 0.25 percentage points will be implemented within this year.
On Wall Street, evaluations suggest that 'the bull market may continue, but the potential for gains may be limited depending on tariffs and fiscal variables.' Given that the S&P 500 has averaged a 114% bull market since 1929, the current 75% increase leaves open the possibility for additional rallies.