Goldman Sachs maintains an optimistic view on the U.S. economy, forecasting robust GDP growth of 2.5% in 2025, which is significantly above consensus. This is underpinned by a belief in the continuation of the soft landing, with core inflation expected to normalize back to 2% by year-end, allowing the Federal Reserve to continue its rate-cutting cycle.
The primary focus for investors has shifted from the underlying economy to policy uncertainty associated with the incoming Trump administration. The most significant anticipated policy is a sharp increase in tariffs on Chinese goods, with potential for new tariffs on European and Mexican imports as well.
While the S&P 500 is forecast to continue its ascent, the market's high forward P/E multiple of 23x reflects much of the good news. A key dynamic expected in 2025 is the narrowing of the performance and earnings growth gap between the mega-cap tech stocks and the rest of the S&P 500, suggesting a potential rotation and broadening of the market rally.
Goldman Sachs has raised its long-term potential GDP growth forecast for the U.S., citing structural factors like the productivity impact of AI and increased labor supply from immigration. This more optimistic structural view contrasts with the Federal Reserve's more conservative estimates.
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