Source Credit : Reuters
Goldman Sachs has revised its recession forecast for the United States, lowering the probability from 45% to 35%. This adjustment marks the first significant change among major brokerages, prompted by a temporary tariff truce with China that has heightened optimism regarding a potential easing of tensions in the global trade war.
On Monday, the United States and China reached a significant agreement to reduce tariffs on each other's imports for a period of 90 days. Under this arrangement, the U.S. will lower its tariffs on Chinese goods from 145% to 30%, while China will reduce its duties on U.S. imports from 125% to 10%. This development marks a pivotal step in easing trade tensions between the two nations and fostering a more balanced economic relationship.
Last month, global brokerages increased their projections for the likelihood of a recession in both the United States and worldwide, citing concerns over tariffs that could undermine business confidence and impede economic growth. In a recent note, Goldman Sachs also revised its forecast for U.S. GDP growth in 2025, raising it by 0.5 percentage points to a new estimate of 1%.
With an optimistic outlook for economic growth, Goldman Sachs now anticipates a total of three interest rate cuts from the Federal Reserve in 2025 and 2026. The firm has revised its forecast to include an initial reduction in December, rather than July, followed by additional cuts in March and June of the following year.
"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," Goldman said.
Goldman Sachs has revised its year-end target for the S&P 500 index, increasing it from 5,900 to 6,100 points. This adjustment is attributed to a decrease in tariff and recession risks, as noted in a recent report. As of Monday, the index closed at 5,844.19 points.
On Monday, Citigroup revised its forecast for a Federal Reserve interest rate cut, now anticipating it to occur in July rather than June.
