Goldman Sachs(US:GS) Zhi Tong Cai Jing·2025-07-31 07:09Core Insights - Goldman Sachs expresses concerns over the sustainability of U.S. debt due to a large fiscal deficit, which is putting pressure on long-term U.S. Treasury bonds and the dollar exchange rate. However, there are signs that the U.S. stock market may continue to rise strongly [1] Economic Outlook - Goldman Sachs' chief economist Jan Hatzius forecasts a year-on-year GDP growth of approximately 1% for the fourth quarter, with a recession risk estimated at 30%, double the historical average. Economic growth is expected to remain slow [2] - Despite minimal price impact from import tariffs so far, core inflation is projected to rise by about 1 percentage point this year, exceeding 3%, which will pressure consumer spending that is already stagnant [2] Fiscal Deficit Impact - The current U.S. budget deficit is around $2 trillion, approximately 6-7% of GDP, at a historical high outside of recession periods. Concerns over the deficit are starting to affect the prices of long-term U.S. government bonds, leading investors to demand higher returns [2][3] - The view on U.S. Treasury bonds as a safe haven asset is being questioned, as their performance has not aligned with expectations in recent months [3] Investment Sentiment - Goldman Sachs' global co-head of banking and markets, Ashok Varadhan, notes that U.S. Treasury yields have risen, making them attractive to private investors, contrasting with the negative real interest rates seen during the global financial crisis to the COVID-19 pandemic [3] - Varadhan anticipates a steepening of the U.S. Treasury yield curve as the Federal Reserve lowers policy rates, raising questions about the adequacy of data to support either minor or significant monetary policy easing [3] Currency and Asset Valuation - Due to fiscal concerns, many investors are becoming more pessimistic about the dollar, with Goldman Sachs predicting further depreciation. However, the U.S. is not alone in facing large budget deficits among developed markets [4] - Varadhan suggests that the value of assets like gold and Bitcoin may rise relative to fiat currencies [4] Stock Market Outlook - Despite rising deficits potentially challenging long-term U.S. Treasury yields, net stimulus measures may boost GDP growth in the short term. Significant investments in artificial intelligence could help maintain corporate earnings resilience [5] - Varadhan remains strongly bullish on the U.S. stock market, emphasizing the importance of regulatory easing and the ability to attract top talent to the labor market for economic growth [5]