Goldman Sachs Outlook for 2025

Investing.com — Goldman Sachs expects US outperformance to continue in 2025, driven by policies anticipated under the newly elected Trump administration.

In a note released Thursday, Goldman strategists present a generally favorable outlook for global markets, with their baseline forecast implying “a benign risk backdrop and US outperformance.”

> “We expect modest positive returns across equities, commodities, and DM bonds, alongside gradual USD appreciation,” strategists led by Jan Hatzius wrote.

However, they caution that markets have already moved significantly in a risk-positive direction and stress the importance of limiting exposure to tail risks surrounding their baseline forecast.

Goldman Sachs projects US economic growth at 2.5% for 2025, outpacing other developed markets (DMs) for the third consecutive year. This positive outlook is attributed to expected Trump administration policies, including higher China and auto tariffs, lower immigration, new tax cuts, and regulatory easing.

These measures are likely to enhance business sentiment and investment, although the potential for “a large across-the-board tariff” could pose a substantial downside risk.

In contrast, the Eurozone and China are facing more subdued outlooks. Goldman has revised its Euro area GDP forecast down to 0.8%, citing structural headwinds and uncertainties regarding US trade policy. Similarly, China’s growth forecast has been adjusted to 4.5%, reflecting the effects of higher US tariffs, tempered somewhat by macroeconomic stimulus measures.

Regarding inflation, Goldman predicts US core PCE inflation to slow to 2.4% by late 2025, slightly above earlier projections. Nonetheless, a broad tariff of 10% could escalate inflation to around 3%.

On the other hand, inflationary pressures in Europe and Japan are expected to remain subdued, supporting the broader global disinflation trend.

According to Goldman’s note, a wider trade war would bolster the US dollar but exert downward pressure on global equities.

> “Unusually high US equity valuations not only dampen long-term expected returns but also amplify the potential reaction to any economic weakness,” strategists emphasized.

Conversely, positive developments could arise if policies become more favorable to corporations, oil prices plummet significantly due to excess capacity, or concerns regarding inflation and fiscal issues prove to be overstated.