From 'Magnificent 7' To 'Maleficent 7,' Goldman Sachs Slashes Year-End S&P 500 Target

The rally that propelled the S&P 500 to record highs is fading, leading Goldman Sachs to lower its year-end target for the index and dub the once-dominant Magnificent Seven stocks the “Maleficent Seven.”

Chief U.S. equity strategist David J. Kostin said the revision reflects a weaker economic growth outlook, higher trade tariffs and a more uncertain policy environment – factors that are now pressuring corporate earnings and equity valuations.

In a note shared Monday, Kostin’s team lowered the S&P 500’s year-end target from 6,700 to 6,200 points. “The proximate causes of the market decline are the jump in policy uncertainty largely related to tariffs, concerns about the economic growth outlook, and a positioning unwind, especially among hedge funds.”

Despite the revision, the new target still implies an 11% upside from current levels, though the market will need clearer catalysts for a sustained rally.

Why Goldman Sachs Is Cutting Its Forecast

One of the biggest drivers of Goldman’s revision is weaker corporate earnings growth.

The firm now expects S&P 500 earnings per share to reach $262 in 2025, down from $268, and $280 in 2026, down from $288. This reflects an expected 7% EPS growth rate for both years, down from the previous 9% forecast for 2025.

Kostin highlighted a slower-than-expected U.S. GDP growth, which Goldman now projects at 1.7% for the fourth quarter of 2025, down from 2.2%. This downgrade reflects the impact of higher tariffs and increased economic uncertainty, which are weighing on corporate investment and consumer demand.

Another key factor in Goldman’s target revision is lower valuation expectations. The bank reduced its projected forward price-to-earnings multiple for the S&P 500 from 21.5x to 20.6x, citing a higher equity risk premium due to rising economic uncertainty.

“Higher uncertainty and slower earnings growth also mean lower fair-value multiples,” Kostin said.

Tariffs Are Hitting Corporate Profits

Goldman Sachs highlighted the impact of rising U.S. tariffs, which are now expected to increase by 10 percentage points to 13%.

“For tariffs, our rule of thumb is that every 5 pp increase in the U.S. tariff rate reduces S&P 500 EPS by roughly 1-2%, assuming companies are able to pass through most of the tariffs to consumers,” Kostin said.

In a more severe risk scenario where tariffs rise to 18%, Goldman’s economists estimate an additional 2% downside to the S&P 500 EPS forecast.

The ‘Magnificent 7’ Pullback Weighs On the Market

In the last three weeks, the S&P 500 has dropped 9% from its peak with more than half of those losses come from the 14% decline in the Magnificent Seven’s stock prices.

“Valuations are adjusting to a new reality where economic growth and corporate profits are more uncertain,” Kostin said.

He indicated that while these companies still have strong earnings potential, investors are waiting for either stronger economic data or a clear buying signal before stepping back in aggressively.

The Roundhill Magnificent Seven ETF MAGS rallied 2.3% on Wednesday on the heals of a lower-than-expected inflation report. The elite group of tech stocks is down 13% year-to-date.

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