The S&P 500 closed at 6,006 on June 9. It will increase 16% to 6,967 in the remaining months of 2025 if its performance matches the historical average. That implies 11% upside from its current level of 6,279.

Likewise, the S&P 500 will climb 31% to 7,868 by June 9, 2026, if its performance aligns with the historical average. That implies 25% upside from its current level. But past results are never a guarantee of future returns.

President Trump's tariffs still pose a threat to the U.S. stock market

President Trump shocked Wall Street April with his "Liberation Day" tariffs, which included a 10% baseline tax on all imported goods and country-specific reciprocal tariffs that were much more severe in most cases. He paused the reciprocal tariffs on April 9, the day they were scheduled to take effect.

The pause was initially scheduled to end of July 9, but the Trump administration recently rolled the deadline to Aug. 1. However, the tariffs imposed to date have still increased the average tax on U.S. imports to its highest level since 1936, according to the Yale Budget Lab. Most economists expect those taxes to raise consumer prices and slow economic growth.

For instance, Morgan Stanley economists initially estimated U.S. gross domestic product (GDP) would grow 2.1% in 2025 and 1.6% in 2026. But they lowered their outlook because of tariffs, such that their forecast now calls for U.S. GDP to increase 1.5% in 2025, followed by 1% in 2026.

Morgan Stanley economists also expect inflation to reaccelerate, potentially reaching 3.5% in the third quarter as companies pass some tariff-related costs to consumers. For context, inflation measured 2.4% in May. A meaningful uptick in consumer prices would probably cause the stock market to fall, especially in the context of slower economic growth, a situation known as stagflation.

Here's the bottom line: History says the S&P 500 could score huge gains in the remaining months of 2025, but tariffs are a source of great uncertainty. Duties imposed to date have yet to materially weaken the economy, but that's probably because companies stockpiled inventory beforehand. Also, if the U.S. fails to reach trade deals with key partners, goods from several countries could face much higher tariffs come Aug. 1.

Some analysts think the stock market has priced in no substantial increase in the average tariff rate, which implies little chance of upside and plenty of risk to downside in the near term. Put differently, the stock market may not move much even if the U.S. strikes dozens of trade deals, but stocks could fall sharply if those deals fail to materialize and reciprocal tariffs come back in force.

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Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

This article was first published on The Motley Fool