Where to Invest in the Back Half of 2025
If we had to pick a theme for our midyear outlook this year, it would be “wait and see.” Wall Street’s crystal ball has rarely been murkier.
Will the Trump administration’s tariffs reignite inflation? Will the U.S. economy slide into a recession? Has the U.S. stock market put a spring swoon definitively behind it? The answer to all of the above: We’ll have to wait and see.
That’s always the answer when it comes to forecasting, of course, especially the direction of the market. But the weight of the evidence usually tips the scales one way or another, toward offense or defense — only now, the evidence is still up in the air and shifting almost daily.
“These are interesting times,” says Jody Jonsson, a portfolio manager and vice chair of fund company Capital Group with 38 years of financial industry experience. “What’s happening right now is different than anything I’ve seen in my entire career, a fundamental restructuring of the world order — politically, economically and militarily.”
We don’t know how all of 2025’s known unknowns will resolve. But it’s certain that uncertainty will reign for a while longer.
There are signs that the broad U.S. stock market may have already hit its low, and it closed out the month of April on a hot streak. Yet plenty of skepticism remains about a durable bullish breakout. The market is likely to stay choppy for much of the rest of the year, whipsawed by policy news from the White House and by economic data that will either confirm or contradict the recent abysmal readings on investor sentiment and confidence.
“Everyone craves certainty,” says Keith Lerner, chief market strategist at Truist Wealth. “But in this world, you have to think about what could go right and what could go wrong, and what belongs in your portfolio depending on different outcomes.”
Even if all goes fairly well — that is, if tariffs as proposed now come down as deals are negotiated and the Trump administration turns to traditionally pro-growth tax cuts and deregulatory policies — investors could still wind up at year-end not far from where they finished in 2024.
Dashed hopes
In our January outlook issue, we said an S&P 500 index level between 6300 and 6600 made sense for year-end. At the time, strategists were raising their price targets faster than we could keep up with them, and the mood on Wall Street was euphoric.
But after a tariff-induced tantrum turned a run-of-the-mill market correction into a near-bear experience in April, with the S&P 500 down nearly 19% from its high (20% marks a bear market), Wall Street’s forecasters brought out their markdown pens.
The range of year-end S&P 500 targets is wide — between 5550 and 6600 among analysts we talked to or track. We think somewhere in the middle is a safer bet — say, a level between 5800 and 6000. At the midpoint, that would imply a nearly 6% rise in price from the April 30 close of 5569. (Prices, returns and other data in this story are as of April 30, unless otherwise noted.)
That would still be down some 4% from the market’s February high, and essentially flat compared with 2024’s close. Dividends, with an average annualized yield of 1.4% for stocks in the S&P 500 recently, will make a more important contribution to total returns.
Peak uncertainty
Whatever their political persuasion, investors re-learned the lesson this year that markets hate uncertainty.
President Trump’s first 100 days in office, which ended on April 30, delivered that in spades, leading to the second-worst performance for a presidential debut since 1945, behind only Richard Nixon’s second term. Amid a barrage of executive orders and federal workforce firings, on-again, off-again tariffs most roiled financial markets. Is the worst over? Many on Wall Street think so.
“There’s a chance that peak-level uncertainty occurred on April 2,” when reciprocal tariffs were first rolled out, says Chris Fasciano, chief market strategist at Commonwealth Financial Network.
The ferocity of the downturn that followed, extreme bearish sentiment among investors and swift downward revisions of corporate earnings estimates can all be contrarian indicators that signal a market trough.
“People are excessively negative,” says Brian Belski, chief investment strategist at BMO Capital Markets. “They’re acting like it’s the end of the world.”
Belski, who recently lowered his year-end S&P 500 price target from 6700 to a still healthy 6100, calls himself “bullish but with a dose of reality.”
Indeed, by the end of April, a relief rally had pushed stocks up 12% from their low earlier in the volatile month, and in the first days of May, the longest daily winning streak in more than 20 years put the S&P 500 back above pre-tariff levels.
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