Goldman Sachs breaks down what the doomsayers get wrong about the US economy in 8 charts

Core Viewpoint - American investors are increasingly concerned about a potential recession, overheated stock valuations, and the reliance on AI spending to sustain the economy and markets [1][2] Group 1: Economic Outlook - Goldman Sachs' wealth management unit reassures clients that the outlook for the US economy and stock market is positive, stating that many investor concerns are exaggerated [3][4] - The probability of a US recession is estimated at 25%, down from 35% the previous year, with expectations for continued economic expansion and strong earnings growth for the S&P 500 [5] Group 2: US Investment Landscape - The US is still viewed as the leading destination for global investors, with Goldman Sachs emphasizing that the country’s economic wealth, labor productivity, and capital markets are unmatched by other economies [11][15] - Despite political and tariff uncertainties, foreign investment in the US has rebounded, contradicting claims of capital flight [15] Group 3: AI Investment Impact - Goldman Sachs argues that the narrative of the US economy's fragility due to AI investment is overstated, with AI-related spending contributing only 0.1% to GDP growth in 2025 [20][21] - The firm contends that the performance of the S&P 500 is not solely dependent on AI and the so-called "Magnificent Seven" tech stocks, asserting that other sectors also show respectable earnings growth [26][27] Group 4: Market Valuations - While acknowledging that S&P 500 valuations are high, Goldman Sachs does not foresee a market crash, predicting a 7% total return and 10% earnings growth for 2026 [31] - The firm distinguishes current market conditions from past bubbles, asserting that today's tech companies have strong profit margins justifying their valuations [35][36] Group 5: Concerns in Other Assets - Goldman Sachs identifies bitcoin as a bubble, expressing skepticism about its value and warning of potential steep drawdowns [41] - The report also highlights concerns regarding gold prices and generative AI companies, suggesting that some valuations in these areas may be unsustainable [46][48]