Goldman Sachs strategists have significantly increased their forecasts for U.S. credit spreads, citing heightened trade policy risks and signs that Trump is willing to tolerate near-term economic weakness. The firm sees the potential for wider spreads as markets digest the implications of new U.S. tariffs and their broader impact on corporate borrowing costs. The shift in expectations reflects concerns that elevated funding costs and trade-related disruptions could weigh on corporate credit conditions, particularly in sectors sensitive to global supply chain pressures.

In a separate note, Goldman Sachs lowered its 2025 year-end target for the S&P 500 to 6,200 from 6,500, reflecting a 4% reduction in its fair-value forward price-to-earnings (P/E) multiple from 21.5x to 20.6x. The firm also trimmed its earnings per share (EPS) estimates for the index, now expecting $262 EPS for 2024 (previously $268) and $280 for 2025 (down from $288).

While Goldman remains constructive on U.S. equities, the downward revision suggests that on-hold Fed interest rates and geopolitical uncertainties, including tariffs, may cap valuation expansion in the near term.