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Goldman Sachs has raised the likelihood of a U.S. recession to 35% over the next year, citing increased tariffs and declining consumer sentiment. The bank predicts inflation will rise to 3.5% and unemployment to 3.5%, while projecting weak economic growth of just 0.2% for Q1 and 1% for the year, raising concerns of stagflation. Additionally, Goldman Sachs anticipates the Federal Reserve will cut interest rates three times in 2025 to stimulate growth, despite the risk of further inflation.
Goldman Sachs warns that impending tariffs from the Trump administration could lead to higher inflation, increased unemployment, and stagnant economic growth. The firm predicts a potential rise in tariff rates by 15 percentage points, with a more moderate increase of about 9 percentage points expected due to exemptions. Inflation is projected to reach 3.5% by 2025, while economic growth may slow to an annualized rate of just 0.2% in Q1 and 1% for the year. Unemployment is anticipated to rise to 4.5%, and the likelihood of a recession in the next year has increased to 35%.
Goldman Sachs anticipates that President Trump's impending tariffs will significantly increase inflation and unemployment while stunting economic growth, raising recession risks to 35%. The firm projects inflation to reach 3.5% by 2025 and expects the Federal Reserve to implement three rate cuts this year. With a potential tariff increase of 15 percentage points, the economic outlook suggests a return to stagflation reminiscent of the late 1970s and early '80s.
An investigation into Credit Suisse's historical ties to the Nazi regime has revealed that the bank withheld crucial information during 1990s inquiries. Led by former U.S. prosecutor Neil Barofsky, the probe uncovered previously undisclosed Nazi-linked accounts and identified clients on the "American Blacklist." Despite past reparations of $1.25 billion to Holocaust victims, questions about the bank's transparency persist, with a final report expected in early 2026.
Despite a strong bull market and impressive returns, concerns are rising over the reliance on the "Magnificent Seven" tech stocks, with warnings of potential market bubbles. Economists highlight high valuations and the risk of a significant downturn, which could impact consumer confidence and spending. While the economic backdrop appears stable, the possibility of a correction looms, prompting investors to reassess their risk exposure.
Global equity markets are poised for growth, supported by lower interest rates and China's significant stimulus package aimed at revitalizing its economy. The ongoing AI revolution further enhances this positive outlook, despite potential volatility from geopolitical tensions and upcoming US elections. Investors are encouraged to position for long equity exposure as structural support builds through 2025.
Paul Volcker
People
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Goldman Sachs Raises US Recession Odds Amid Tariff Concerns and Inflation Risks
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