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Goldman's Hatzius and Kostin on Markets and Macro in 2025 | Odd Lots

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Jan Hatzius and David Kostin(Chief Economist and Chief U.S. Equity Strategist, Goldman Sachs, guest)

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Executive Summary

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Keep pulling the thread on Jan Hatzius and David Kostin.

Constructive U.S. Macro Outlook Policy Uncertainty as the Dominant Risk

10 quotes

Concerns Raised

High degree of policy uncertainty from the incoming Trump administration, particularly regarding tariffs.
The risk of retaliatory tariffs from China and other trading partners impacting U.S. companies with international sales.
Elevated U.S. equity market valuations, with the S&P 500 trading at a high forward P/E multiple of 23x.
The U.S. federal deficit is expected to remain high at around 6% of GDP, well above aspirational political targets.

Opportunities Identified

A broadening of the equity market rally as the earnings growth gap between mega-caps and the rest of the market narrows.
A significant 25% increase in M&A activity is forecast for 2025, creating event-driven investment opportunities.
The Federal Reserve is expected to continue cutting rates, with the terminal rate potentially settling below current market expectations.
Investing in U.S. companies with primarily domestic customer bases to hedge against potential retaliatory tariffs.

Key Themes

Research Findings12

Goldman Sachs forecasts the S&P 500 will reach 6,500 by the end of 2025, representing a gain of approximately 7.7% from current levels.

Goldman Sachs forecasts S&P 500 earnings will grow by 11% in 2025 and 7% in 2026.

Goldman Sachs expects a significant increase in U.S. tariffs on Chinese goods, incorporating a 20 percentage point increase in the average tariff rate into their forecast.

Goldman Sachs forecasts U.S. GDP growth of 2.5% in 2025, which is more than half a percentage point above the current Bloomberg consensus.

The earnings growth gap between the Magnificent Seven and the rest of the S&P 500 is expected to narrow from 30 percentage points in 2024 to 6 percentage points in 2025, and further to 4 percentage points in 2026.

Goldman Sachs forecasts that U.S. core inflation will return to approximately 2% by the end of 2025, excluding the impact of tariffs, but their official forecast including tariffs is 2.4%.

Goldman Sachs predicts the terminal Federal Funds Rate will settle in the low to mid-three percent range, which is below current market pricing.

Goldman Sachs raised its long-term potential growth estimate for the U.S. by 0.4 percentage points, from 1.8% to 2.2% for the years around 2030, due to the expected productivity impact of AI.

Goldman Sachs forecasts a 25% increase in M&A activity in calendar year 2025.

The outperformance of the largest-cap stocks versus the S&P 500 is forecast to decline from 63 percentage points in 2023 and 22 points in 2024 to approximately 7 percentage points in 2025.

Goldman Sachs predicts the U.S. will impose additional tariffs on automobiles from Europe and Mexico.

Goldman Sachs forecasts the U.S. federal deficit will be closer to 6% of GDP, viewing the goal of 3% as ambitious and unlikely.

Topics

2025 Outlook S&P 500 Economic Forecast Goldman Sachs GDP Growth Inflation Federal Reserve Monetary Policy Tariffs US-China Relations Trade Policy Trump Administration Equity Strategy Market Valuation Magnificent Seven M&A Fiscal Policy

Processed Apr 2, 2026Daily intelligence brief → yt-dlp + mlx-whisper + Gemini

Goldman's Hatzius and Kostin on Markets and Macro in 2025 | Odd Lots

Continue your research

Concerns Raised

Opportunities Identified

Key Themes

Constructive U.S. Macro Outlook

Policy Uncertainty as the Dominant Risk

Equity Market Broadening and Valuation

Long-Term U.S. Growth Potential

Research Findings12

Topics