Goldman Sachs has revised its recession forecast for the United States (U.S.), decreasing it from 45 percent to 35 percent. This adjustment is the first major update among brokerages after a temporary truce on tariffs with China, raising hopes for a potential easing of the ongoing global trade war.
On Monday, a landmark agreement was reached between the U.S. and China, where both countries will lower tariffs on each other’s imports for a duration of 90 days. Specifically, the U.S. will decrease its tariffs on Chinese goods from 145 percent to 30 percent, while China will cut its duties on U.S. imports from 125 percent to 10 percent.
In the preceding month, many global brokerages had raised their forecasts for a U.S. and global recession, driven by concerns over tariffs that threatened to dampen business confidence and hinder economic growth.Â
In a related development, Reuters also reported that Goldman Sachs has adjusted its forecast for U.S. GDP growth in 2025, increasing it by 0.5 percentage points to 1 percent, as detailed in a statement issued on Monday.
Read more: U.S. and China ease trade tensions with 90-day deal, tariffs cut by over 100 percent
Anticipated rate cuts
With an improved outlook for growth, Goldman Sachs now expects the Federal Reserve to implement a total of three rate cuts in 2025 and 2026. The brokerage anticipates the first reduction to occur in December instead of July, with additional cuts planned for March and June of the following year. This marks a shift from their previous prediction, which had anticipated three rate cuts within the current year alone.
Goldman Sachs further elaborated, stating, “The rationale for rate cuts shifts from insurance to normalization as growth remains somewhat firmer, the unemployment rate rises by somewhat less, and the urgency for policy support is reduced.”
In addition to these changes, Goldman Sachs has raised its end-of-year target for the S&P 500 index to 6,100 points, up from a previous target of 5,900 points. This revision is attributed to decreasing tariff and recession risks, as noted in a separate communication. The S&P 500 index closed at 5,844.19 points on Monday.
Conversely, Citigroup has adjusted its expectations regarding a Federal Reserve rate cut, now predicting it will occur in July rather than June, as stated on the same day.
