Goldman Sachs Exchanges 2025 outlook: Will tailwinds trump tariffs?
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Nov 20, 2024 
Jan Hatzius, chief economist at Goldman Sachs, and Dominic Wilson, senior advisor in global markets research, share insights on the economic outlook for 2025. They explore the potential impact of Trump's policies on growth and inflation, highlighting a 15% chance of recession. The duo discusses the balance of risks for markets, including high equity valuations and trade policies. They also touch upon how monetary policies may evolve, with possible interest rate cuts, and strategies for investors in navigating the fluctuating landscape.
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2025 US Economic Outlook
- The U.S. economy is expected to grow by 2.5% in 2025, driven by strong real disposable income growth and favorable financial conditions.
- Policy changes under the Trump administration, like tariffs and slower immigration, present both drags and boosts to growth.
Inflation Outlook and Tariff Impact
- Inflation is expected to continue declining, reaching around 2% by the end of 2025, excluding the impact of tariffs.
- Tariffs could add 0.4% to inflation, resulting in a projected 2.4% core PCE inflation by the end of next year.
Market Outlook and Valuations
- Despite the positive economic outlook, market valuations are stretched, partially pricing in the good news.
- Further upside potential exists for equities and the dollar, driven by U.S. outperformance, but the market's view is becoming more balanced.