S&P 500 Will Reach 7,000 By Year-End; Tariff Reaction Seems Exaggerated

The year began on a strong note, with the market climbing over 3% in January amid optimism fueled by Trump's presidency and his market-focused policies. In February, that bullish sentiment persisted until tariffs became the central issue.

Initially, Trump set a deadline of February 1 for imposing 25% tariffs on Mexico and Canada, though he later reached an alternative agreement focused on curbing the fentanyl crisis. The market largely brushed off these developments and continued its upward trend. However, the mood shifted on February 13 when Trump and Commerce Secretary Lutnick announced a broader set of reciprocal tariffs.

The market maintained its momentum for a short period, reaching an all-time high of 6,144 on February 19. But on February 21, a disappointing University of Michigan consumer confidence report sparked fears of inflation and stagflation, leading to a market collapse and a shift toward a bearish sentiment. Despite this, the S&P 500 has only dipped by 0.44%, a much smaller decline than some media outlets have suggested.

This modest drop appears bullish to me. Tariffs represent a significant policy obstacle, and once their impact is absorbed, the market is likely to rebound. Furthermore, anticipated tax cuts later in the year could serve as a strong catalyst for further gains.

In parallel, the Trump administration has succeeded in reducing the 10-year yield from 4.80% in January to 4.20% currently. Although concerns about economic growth remain, this lower yield is expected to provide additional support, working in tandem with tax cuts to boost the market.

Amid the prevailing fear, I see excellent buying opportunities. The reaction to the tariffs seems exaggerated, and I remain very bullish, forecasting that the S&P 500 will reach 7,000 by year's end.