Wall Street bulls up as tariffs roar back
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Illustration: Aïda Amer/Axios
Two of Wall Street's biggest banks have very differing views of how the economy will develop this year, but they agree on one thing: Don't sweat tariffs, just buy stocks.
Why it matters: Both Goldman Sachs and Bank of America emphasize the continued resilience of corporations, regardless of tariff policy.
- That view holds regardless of any pessimism about the broader economy.
The big picture: BofA sees stagflation ahead — continued inflation with a side of slowing growth. But the bank makes the argument that even in the stagflationary 1970s, some sectors, such as large-cap value stocks, still outperformed handsomely.
- On the other hand, Goldman sees solid growth and cooling inflation that allows the Federal Reserve to cut rates deeper, earlier.
Between the lines: A portfolio built for resilience in a stagflationary environment could look quite different than a portfolio built to benefit from a kick-started growth cycle.
- BofA's stagflation playbook argues for large-cap value over growth stocks, stocks over bonds and dividend-paying names that can generate income and protect against inflation.
- Goldman's playbook for the second half of 2025 prioritizes balanced sector allocation, emphasizing sectors like software and services that can still benefit from AI; alternative asset managers that have lagged the broader sector; and companies with high floating-rate debt that can benefit from lower bond yields.
Zoom out: BofA has a 6,300 price target on the S&P heading into year-end, while Goldman has a 6,600 price target for the same window.
- "No recession, equity prices rally, that is our baseline," said Goldman's David Kostin.
- "I do not want to be short equities in this environment," said BofA's Savita Subramanian.
Yes, but: What about the tariffs? Both BofA and Goldman remain bullish on corporate performance regardless.
- "The US isn't exceptional, but Corporate America might be," Subramanian titled her note outlining the call behind the bank's raised target.
- Kostin emphasized the continued strength of the largest stocks in a note to clients.
The bottom line: The forecasts differ on the economic path forward, but neither overemphasizes the risk of tariff policy, and both imply a bullish outlook for stocks this year.
