Several Wall Street banks including JPMorgan Chase are abruptly changing their forecasts for the US stock market.

JPMorgan Chase’s head of global market intelligence Andrew Tyler says the lender’s trading desk is flipping short-term bearish on the stock market amid a deteriorating macroeconomic backdrop, reports Bloomberg.

All in all, the US stock market has wiped out $3.4 trillion this year, giving up all of the gains witnessed since Trump won the election in November.

Tyler’s team sees President Donald Trump’s trade war as a headwind that could limit the US economy’s growth.

“With this in mind, we are changing our view to tactically bearish… Given the uncertainty, positioning, and potential for a negative feedback loop to push people to using the recession playbook, we think the bearish position makes the most sense.” 

Earlier this week, Trump imposed 25% tariffs against both Canada and Mexico, leading to a 500-point drop in the Dow, alongside small drops in the Nasdaq and S&P 500.

As the equity market retreats, Goldman Sachs analyst David Kostin says in an investor note that equity valuations are not yet low enough to trigger a significant bounce. He also believes that the stock market will only regain bullish momentum if the US economy begins to show signs of strength.

“An improvement in the US economic growth outlook will be required to fully reverse the recent equity market weakness.”

On his forecast for stocks this year, Kostin says,

“Equity returns will be more modest than last year and match the trajectory of earnings growth.”

Meanwhile, Morgan Stanley believes that the stock market will see “muted” gains this year. Andrew Slimmon, the firm’s head of applied equity advisors team, says stocks have been in a bull market since 2023, leading to concerns that the market may be overvalued.

Slimmon also says that the third year of an equities bull market typically prints mediocre gains on average based on historical data.

“With enough negatives out there, including higher-for-longer interest rates and geopolitical noise, to cause a subpar year, the recently minted optimists could revert to being skeptics, only to have the market roar again in 2026. In that case, 2025 could be more of a pause year than anything more sinister.”

Last year, all three firms predicted that the S&P 500 would soar to greater heights this year, believing that a Trump presidency would create a favorable macroeconomic environment. JPMorgan, Goldman Sachs and Morgan Stanley predicted that the S&P 500 will reach a new all-time high of 6,500 points in 2025.

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Big banks are quietly scrubbing the public record of their diversity, equity and inclusion (DEI) policies following US President Donald Trump’s upheaval of the controversial practice.

Citing banking executives, lawyers and other insiders familiar with the matter, The Wall Street Journal reports that JPMorgan Chase, Citigroup and Morgan Stanley are all “watering down” their language on DEI, while Wells Fargo and Bank of America are also starting to analyze their language.

It marks the first time that Wall Street has pulled away from DEI since first embracing it in 2020.

The banks’ pivot is in reaction to Trump’s signing of the executive order titled “Ending Radical And Wasteful Government DEI Programs And Preferencing” targeting DEI, plus his rescinding of over 80 executive orders signed by former US President Joe Biden that touch on DEI.

Morgan Stanley has reportedly deactivated a page on its website promoting a scholarship and recruiting program that was advertised as being for people who are “historically underrepresented in the financial services industry.”

If the link is reactivated, WSJ reports that Morgan Stanley will most likely reword it so the program is being advertised to a wider array of applicants.

Certain banks have also been warned by their lawyers that keeping DEI practices in place after erasing public affirmations of them leaves them at risk for criticism or potential litigation if whistleblowers alert federal officials or activists.

FOX News reported that workers and civil rights organizations have begun suing to stop Trump’s executive orders, arguing among other things, that they will negatively affect certain groups of people.

White House spokesman Harrison Fields said the Trump administration was “ready to face them in court.”

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US financial giant Morgan Stanley says the Department of Government Efficiency (DOGE) headed by Elon Musk is likely extremely bullish for the US economy.

In a new interview on CNBC, Mike Wilson, Morgan Stanley’s chief investment officer and chief US equity strategist, says that the bank’s “bull case” for this year is that the US government shrinks, causing unemployment to go up, pushing the Fed into cutting rates and creating a “broadening out” of the economy.

With DOGE already reportedly weeding out tens of billions of dollars worth of government waste, the CIO says that a more balanced federal budget could be the catalyst that boosts markets in 2025 – similar to President Clinton’s budget cuts of 1994 which preceded a parabolic advance in the stock market.

“I think they’re working on it. Probably the most underestimated part of the administration is DOGE. I think there’s a lot of skepticism on this, but the reality is that’s is possibly the most bullish thing that could happen. If you could shrink the government in a way that’s constitutional…

It’s the most exciting thing I’ve heard in a while. Remember, in the 1990s, we had this great bull market. The thing that really sparked it in my view, was the budget deal that happened in 1994. I’m not sure we can get to that kind of a balanced budget but if we can make progress on that, it liberates the private economy.”

Wilson says there isn’t a specific dollar amount that needs to be cut, just a bare of minimum of slowing down expenditures. At time of writing, the US national debt is at $36.2 trillion, up nearly $2.1 trillion in the past year.

Says Wilson,

“We just need to freeze spending, we don’t really need to cut a lot of spending, we’re running so far above trend on actual expenditures, let’s just freeze it or at least slow it down. We’re growing at a much faster rate than the economy is growing. That’s the ‘crowding out feature,’ which by the way has kept rates higher than they probably would’ve been otherwise.”

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