Deutsche Bank has increased its year-end target for the S&P 500 to 6,550, up from its previous target of 6,150. The bank cited a smaller-than-expected earnings drag from tariffs and a strong U.S. economy as key reasons for the revision. This adjustment follows similar target raises by other major Wall Street firms, including Goldman Sachs, UBS Global Wealth Management, and most recently, RBC Capital Markets.
Reduced Tariff Drag Supports Market Optimism
In a note released Monday, Deutsche Bank strategist Binky Chadha explained the change:
“We now see a tariff drag of only about a third of what we had previously forecast.”
The new target implies a 10.35% upside from the S&P 500’s last closing price of 5,935.94.
Market Gains Fueled by Tariff Easing and Strong Earnings
The S&P 500 posted its biggest monthly gain since November 2023 in May. This surge was driven by U.S. President Donald Trump’s more dovish approach to tariffs, strong corporate earnings, and low inflation data. These factors helped the market recover from losses seen in April.
Caution on Market Volatility Amid Trade Uncertainties
Despite the optimistic outlook, Deutsche Bank warned that the current rally could be fragile. The bank cautioned that renewed trade tensions might trigger a market pullback.
“We expect a sharp correction in this rally as trade policy continues to escalate and de-escalate,” the note said.
Earnings Forecast Also Raised
Deutsche Bank also lifted its earnings per share (EPS) forecast for the S&P 500 to $267, up from the prior estimate of $240, reflecting improved corporate profit expectations.
