BofA Global Research and Goldman Sachs on Tuesday became the latest Wall Street brokerages to raise their year-end targets for the S&P 500 index. This move is broadly driven by reduced policy uncertainty, resilient corporate earnings, and potential interest rate cuts, indicating a strengthening positive sentiment in the American market. BofA lifted the benchmark’s index target to 6300 from 5600, while Goldman Sachs raised its target to 6600 from 6100. These targets imply an upside of 1% and about 6% respectively, relative to the last close of 6,229.28.

This marks Goldman’s second upward revision in two months, following a previous increase in early May. Earlier this year, major brokerages, including BofA, cut their targets below 6,000 after U.S. President Donald Trump’s “Liberation Day” tariffs in April sparked fears of a U.S. recession and escalated global trade tensions, triggering a sell-off in equities. However, subsequent reductions in some tariff rates have since eased investor concerns, diminished recession risks, and driven stocks to record highs last week, contributing to the current upward price target revisions.

The Rationale for Optimism: Earnings Growth, Rate Cuts, and Moderating Inflation

Goldman Sachs’ updated optimism rests on several significant pillars. The bank noted in a report late on Monday that “a resilient outlook for 2026 earnings growth, the resumption of Fed rate cuts, and neutral investor positioning argue for further market upside as the recent narrow rally broadens.” Recent softer U.S. economic data have also boosted expectations for further interest rate cuts by the U.S. Federal Reserve, which could further support equity markets. “Recent inflation data and corporate surveys indicate less tariff pass-through so far than we expected,” Goldman Sachs added. This statement suggests that companies are managing to absorb tariff costs better than initially anticipated, or they are finding ways to streamline operations and reduce the need to pass costs on to the final consumer.

Last month, other major banks such as Barclays, Citigroup, and Deutsche Bank had already lifted their S&P 500 targets. This broad trend on Wall Street reflects growing confidence in the resilience of the U.S. economy and companies’ ability to continue growing and profiting even in a dynamic macroeconomic environment. The reduction in policy uncertainty, particularly regarding tariffs, provides a significant tailwind for the stock market, as it allows businesses and investors to plan for the longer term with greater certainty.

Short-Term and Long-Term Targets: Between Volatility and Trade Conflicts

Goldman Sachs also raised its short-term and medium-term targets for the index. The target for the next three months was updated to 6400 from 5900, while the 12-month target was raised to 6900 from 6500. These aggressive targets reflect the bank’s optimism about the market’s continued positive momentum and the assessment that the broader upward trend is likely to persist.

However, the outlook is not without its challenges. President Trump intensified his trade war on Monday, informing 14 nations, including Japan and South Korea, that they now face sharply higher tariffs from a new deadline of August 1. This announcement, signaling a potential escalation in global trade tensions, could dampen optimism. Goldman Sachs noted that “we expect the digestion of tariffs to be a gradual process, and large-cap companies appear to have some buffer from inventories ahead of the increase in tariff rates.” This statement suggests that larger companies may be more resilient to the immediate impacts of tariffs due to their ability to manage inventories and adjust supply chains. Nevertheless, if tariffs remain in effect for an extended period and lead to more widespread disruptions, they could pose a significant challenge even for these companies.

Looking Ahead: Balancing Optimism with Risk Management

The upward revision of S&P 500 targets by BofA and Goldman Sachs reflects a growing sense of optimism on Wall Street, driven by resilient earnings data, expectations for rate cuts, and moderating policy uncertainty. The U.S. stock market, led by the S&P 500, has demonstrated remarkable flexibility and recovery capacity even in the face of challenges. However, the continuation of the trade war, and the possibility of further escalation, remain a significant risk. Companies will need to continue cautiously managing their supply chains and adapting their business models to a changing global environment.

Investors will continue to closely monitor these developments. On one hand, there is an opportunity for further gains if macroeconomic conditions remain supportive and the Fed implements expected rate cuts. On the other hand, any unexpected escalation in trade tensions or disappointing economic data could rattle the market. The ability of large companies to absorb tariff costs and maintain profitability, while preserving consumer confidence, will be crucial for the continued upward trend. The move by BofA and Goldman Sachs sends a clear positive signal, but it also serves as a reminder that the journey to a successful market year still includes potential obstacles.