Goldman Sachs(US:GS) Hua Er Jie Jian Wen·2025-03-31 00:50Core Viewpoint - Goldman Sachs has raised the probability of a U.S. recession in the next 12 months from 20% to 35%, nearly doubling the previous estimate, primarily due to the upcoming "reciprocal tariff" policy announced by the Trump administration [1][2]. Economic Outlook - The increase in recession probability reflects lower economic baseline expectations, a sharp decline in consumer and business confidence, and comments from White House officials indicating a willingness to tolerate short-term economic weakness to achieve policy goals [2]. - Goldman Sachs has also raised inflation expectations and lowered GDP growth forecasts, predicting a 0.5 percentage point increase in the core PCE price index to 3.5% by the end of 2025, and a 0.5 percentage point decrease in GDP growth to only 1.0% (year-over-year) [2]. - The unemployment rate is expected to rise to 4.5% [2]. Federal Reserve Actions - Goldman Sachs anticipates that the Federal Reserve will cut interest rates three times in 2025, specifically in July, September, and November, maintaining the federal funds rate in the range of 3.50-3.75% [3]. - Previously, Goldman Sachs had not expected any rate cuts in 2025 and only one in 2026, indicating a significant shift in outlook [4]. Consumer Vulnerability - The economic fundamentals in the U.S. are expected to weaken, with increased consumer vulnerability, and actual income growth projected to be only 1.4% in 2025, significantly lower than in recent years [4]. - Recent declines in consumer sentiment are viewed as more significant due to the current economic fundamentals being weaker than in previous years [5].