MW Here comes another Wall Street S&P 500 target reduction. Stagflation risks are rising.

By Steve Goldstein

Jefferies became the latest Wall Street firm to backtrack on its S&P 500 target as the bank warned that an economic slowdown - but not a recession - will be a drag on earnings.

Jefferies lowered its year-end S&P 500 target to 5,300 from 6,000.

The S&P 500 SPX closed Monday at 5,406, up 11% from mid-April lows but down 8% on the year.

Strategists led by Desh Peramunetilleke, head of quantitative strategy, said the risk of stagflation has risen significantly since the introduction of Trump administration tariffs. They said there have been five "stagflation-like" periods since 2001 with rising inflation and falling growth, and returns struggled during those periods.

They acknowledge that President Donald Trump's backtracking to avoid lasting damage suggests he might not take the extreme steps he's threatened, so they only lower the price-to-earnings multiple to 19, which is the 10-year average, from 20.

As their 2026 earnings per share forecast is $280, they rounded down to get a S&P 500 target of 5,300.

Jefferies's new target is among the lowest of firms tracked by Wall Street, though JPMorgan at 5,200 is lower.

The highest is Deutsche Bank, at 7,000.

The Jefferies strategists say defensive sectors perform best during stagflation-like periods, as they recommended underweighting cyclical stocks.

They also identified what they called fallen angels, which they say are beaten-down stocks that are attractively valued with solid profitability and cashflows that have seen flat or positive earnings per share revisions over the last three months.

That list is led by Nvidia $(NVDA)$ and also includes Alphabet $(GOOGL)$, Meta Platforms $(META)$, Bank of America $(BAC.SI)$ and Salesforce $(CRM)$.

-Steve Goldstein

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April 15, 2025 06:27 ET (10:27 GMT)

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