Under the dual pressures of tariff tensions and high inflation, the U.S. stock market faces challenges. However, bullish forecasters on Wall Street remain firmly on the side of investors, encouraging them to stay the course. Julian Emanuel of Evercore ISI pointed out that while the current market environment is reminiscent of the turbulence in 2018—when former President Trump's trade war and the Federal Reserve’s rate hikes led the S&P 500 to drop 6%—there are significant differences between the two periods. He believes that although inflation data has exceeded expectations, inflationary pressures are expected to remain stable, reducing the risk of the Fed adopting a more hawkish stance. Meanwhile, the booming artificial intelligence sector continues to provide additional support for the stock market, despite the high valuations of related stocks.

Trump’s latest announcement of auto tariffs has sparked widespread market concerns, as investors worry that rising import costs could further fuel inflation and that retaliatory measures from trade partners could undermine economic growth. However, these concerns have not shaken strategists’ confidence. They remain optimistic about 2025, expecting strong earnings and economic growth to continue driving U.S. stocks higher. Wall Street forecasters have set an average year-end target of around 6,500 points for the S&P 500, approximately 6% higher than the current closing level.

The S&P 500 has recently been fluctuating near its record close from January 23, exhibiting a “three steps forward, two steps back” pattern. Emanuel expects the index to climb to 6,800 points by the end of the year in a similar fashion. Strategists at Société Générale have projected a year-end target of 6,750 points, citing accelerating corporate earnings and strong economic growth forecasts as key drivers for the market’s upward momentum. They recommend investors hold the equal-weighted version of the S&P 500 to balance the performance of all companies within the index.

As the grace period for Trump’s 25% tariffs on Canada and Mexico nears its end, investor concerns over tariffs are intensifying. According to Goldman Sachs, during Trump’s first term, the S&P 500 cumulatively declined by 5% on days when new tariffs were imposed, while the index fell even more—7%—on days when other countries announced retaliatory tariffs. However, Citi strategists believe that if investors perceive the tariff system as beneficial to U.S. companies, it could have a positive impact on U.S. stocks. They note that while achieving fair trade through such measures is unlikely, greater market access could provide an upside for the S&P 500. Nevertheless, with uncertainty still prevailing, market volatility is expected to persist.

Brian Belski, a strategist at BMO Capital Markets, sees opportunities amid trade tensions. He believes these tensions present a chance to buy stocks of companies that generate most of their revenue domestically. These stocks have become undervalued compared to those of companies with a stronger international focus. Stocks he highlighted include AbbVie, EQT Corp., and Ventas.