UBS Investment Bank’s chief strategist, Bhanu Baweja, told Bloomberg that the U.S. consumer is “visibly tiring,” which could end up pushing stock prices even lower. More specifically, Baweja thinks this could cause the S&P 500 (SPX) to drop by another 8% to 5,300 as analysts cut profit forecasts over the next few months. He also pointed to less spending and falling consumer confidence as other contributing factors.
Even though the S&P 500 has recently bounced back to a two-week high, investors are still worried about the economic impact of new U.S. tariffs starting on April 2. There’s also concern about President Trump’s unpredictable trade policies and unclear rules. Baweja said that the effects of less immigration and lower government spending are now starting to show in the economic data. At the same time, HSBC downgraded its view of U.S. stocks due to growth risks, though others like JPMorgan and Morgan Stanley believe the worst may be over based on investor behavior and seasonal trends.
Nevertheless, Baweja is more positive about U.S. bonds now, especially short-term ones like two-year Treasuries, which are likely to benefit from interest rate cuts. Interestingly, he’s less optimistic about 10-year bonds, which could be hurt by falling demand from foreign investors. He explained that even if the Fed lowers rates, long-term borrowing costs might not drop much, which could hold back company profits. “It won’t be a crisis, but higher long-term rates could still drag down earnings,” Baweja said.
Is SPY a Buy Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (SPY) based on 412 Buys, 85 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average SPY price target of $672.93 per share implies 17.2% upside potential.
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