Goldman Sachs projects continued US economic outperformance in 2025, fueled by policy shifts expected under the Trump administration.

In a Thursday report, Goldman strategists highlighted a positive global market outlook, underpinned by a "benign risk environment and sustained US dominance." Their forecast anticipates favorable conditions for investors, with the US positioned as a standout performer among developed markets.

US Growth Forecast: Policies to Drive Momentum

Goldman Sachs predicts the US economy will grow by 2.5% in 2025, outpacing other developed markets for the third year running. This optimism is rooted in anticipated Trump-era policies, including:

• Increased tariffs on China and automobiles.
• Lower immigration rates.
• New tax cuts.
• Regulatory rollbacks.

These measures are expected to enhance business confidence and spur investment. However, risks remain, particularly if a comprehensive tariff hike materializes, which could hinder growth.

Global Economic Outlook: Challenges for Europe and China

While the US is set to shine, Goldman anticipates a less favorable trajectory for the Eurozone and China:

• Eurozone: GDP growth forecasts have been downgraded to 0.8%, reflecting structural challenges and uncertainties surrounding US trade policies.
• China: Growth projections have been trimmed to 4.5%, as elevated US tariffs weigh on economic activity despite efforts to offset these impacts with macroeconomic stimulus.

Inflation Trends: Mixed Signals

Goldman forecasts US core PCE inflation to moderate to 2.4% by the end of 2025, marginally higher than earlier projections. However, a broad 10% tariff could drive inflation up to 3%.

Globally, inflationary pressures in Europe and Japan are expected to remain subdued, contributing to a sustained global disinflation trend.

Market Implications: Risks and Opportunities

Goldman’s analysis suggests that a broader trade war could strengthen the US dollar but dampen global equities. Elevated US equity valuations also pose a risk, as they amplify market sensitivity to any economic weakness.

Despite these concerns, there are potential tailwinds, including:

• Corporate-Friendly Policies: Business-centric initiatives could drive stronger market performance.
• Declining Oil Prices: Excess supply may relieve inflationary pressures.
• Eased Fiscal Concerns: A more optimistic fiscal outlook could boost investor confidence.

Key Takeaways for Investors

Goldman Sachs' 2025 outlook underscores a pivotal year for global markets, with the US leading the pack in economic growth. Investors should watch for policy developments, inflation trends, and potential risks tied to heightened equity valuations and trade tensions.

By navigating these dynamics, market participants can position themselves to capitalize on opportunities in a year shaped by transformative policies and economic shifts.

(Sources: investing.com, reuters.com)