The S&P 500 (SPX) continues to slide as Wall Street experts increasingly warn about the potential for an economic downturn, with some even mentioning the possibility of stagflation. For context, stagflation is a scenario where economic growth falls, but inflation remains high and unemployment rates rise. Historically, the S&P 500 has performed poorly during stagflationary periods, with an annualized decline of 10%.
This worry has grown as investors try to understand the impact of Trump’s continuously changing trade policies and Elon Musk’s Department of Government Efficiency (DOGE). Indeed, the possibility of stagflation has increased recently, according to Evercore ISI’s Julian Emanuel, who noted that tariff policies and Musk’s DOGE efforts could lead to higher inflation and slower economic growth. However, he did note that there are no clear signs of stagflation yet.
It is also worth noting that several Wall Street firms have reduced their growth targets due to the anticipated impact of restrictive trade and immigration policies. Economists have also lowered their GDP forecasts. In fact, Morgan Stanley economist Michael Gapen revised his economic outlook from “slower growth, stickier inflation” to a more pessimistic “slower growth, firmer inflation.” This change in outlook has led Gapen to lower his full-year GDP growth forecast from 1.9% to 1.5%.
Is SPY a Buy Right Now?
Overall, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 415 Buys, 84 Holds, and six Sells assigned in the past three months, as indicated by the graphic below. After a 13% rally in its share price over the past year, the average SPY price target of $690.21 per share implies 23.1% upside potential.
