Goldman Sachs(US:GS) Hua Er Jie Jian Wen·2025-05-02 08:43Core Viewpoint - The global stock market is experiencing a significant rebound amid easing trade war tensions, but Goldman Sachs warns of substantial uncertainties surrounding Trump's policies and the underestimation of recession risks in the U.S. economy [1][2]. Economic Outlook - Goldman Sachs predicts a 45% probability of a U.S. recession within the next 12 months, driven by rising policy uncertainty and declining business confidence [2][3]. - Key indicators show that the proportion of respondents expecting economic activity to decline is nearing historical highs, alongside potential slowdowns in real income growth and ongoing financial tensions [3]. Market Predictions - In a recession scenario, the S&P 500 index could drop to 4,600 points, representing a 17.9% decline from recent closing prices, while high-yield credit spreads may widen to 788 basis points [3]. - Traditional hedging tools like long-term U.S. Treasuries and the dollar may fail to effectively mitigate stock market risks [4]. Investment Strategies - Gold is identified as the best hedge against recession, with prices potentially reaching $3,880 per ounce by year-end, driven by increased central bank purchases and shifts in private investor allocations [6]. - The report highlights that global gold ETF holdings are only 1% of the U.S. Treasury market size, indicating significant potential for price increases with even minor reallocations from other assets [6]. Oil Market Insights - Oil put options are recommended as a quality hedge in recession scenarios, with Brent crude oil prices potentially averaging $53 per barrel in a U.S. recession context [7]. - The report suggests that oil prices may experience larger declines in the next recession due to OPEC's current high spare capacity [7]. Structural Trends - Goldman Sachs emphasizes the "4D structural trends" that will favor gold and copper in the long term, including de-dollarization, increased defense spending, energy risk mitigation, and insufficient copper mining investments [9][10]. - The report anticipates that European defense spending will rise from 2% to 3% of GDP over the next five years, which will increase demand for copper and other metals [9]. Copper Market Outlook - Insufficient investment in copper mining could lead to price recoveries, with estimates suggesting copper prices may reach $10,600 per ton by December 2026 under non-recession conditions [10]. - In a recession scenario, copper prices could fall below cost support levels, potentially reaching $6,750 per ton [10].