Donald Trump's bark is louder than his bite. Markets have grown so accustomed to his rhetoric that the S&P 500 barely flinched at the White House's latest threat to slap 50% tariffs on copper imports and 200% on pharmaceutical products. The US president made it clear there would be no further extensions after August 1. If countries fail to reach agreements with Washington by then, tariffs will take effect.

Despite a minor pullback, the S&P 500 remains near record highs. In this environment, locking in some profits on long positions seems logical. If investors believe that Trump is more serious than ever, equity markets could correct by 5-10%. That, in turn, could trigger renewed dip-buying by retail investors.

Major banks remain optimistic—or at least moderately so—on the S&P 500's outlook. Goldman Sachs raised its year-end forecast for the index from 6,100 to 6,600 and its 12-month view from 6,500 to 6,900. The firm expects interest rate cuts by the Fed, robust corporate earnings, and falling Treasury yields to act as tailwinds for equities.

S&P 500 performance and Goldman Sachs forecasts

Bank of America takes a more measured stance. It now sees the index ending the year at 6,300, with a 12-month target of 6,600. While BofA believes US exceptionalism is fading, it maintains a constructive outlook thanks to solid corporate profit forecasts.

Despite the average US tariff rate rising to 18.7%, Deutsche Bank research notes that this remains below the 22% peak seen on US Independence Day. Furthermore, market sentiment is buoyed by signs that trade negotiations are picking up steam. Bloomberg intelligence suggests Washington is nearing agreements with India, Taiwan, and the European Union.

Average US tariff trend

Strong corporate earnings are not the only factor arguing for a limited correction in the S&P 500. The US labor market remains resilient, and consumer spending continues to impress. For the broad equity index to experience a deeper pullback, a significant cooling of the American economy would be required.

On the contrary, its rapid expansion, fueled by $3.3 trillion in fiscal stimulus and the prospect of a Fed rate cut, could propel stocks to fresh record highs. It's no surprise Donald Trump keeps pressing Jerome Powell to loosen monetary policy.

Technically, on the daily S&P 500 chart, bears remain active. They launched another assault on key support at the 6,200 pivot level. That attempt, however, ended in failure as well. This setback increases the chances of a renewed uptrend and provides a case for long positions with targets at 6,325 and 6,450.