Goldman Sachs(US:GS) Goldman Sachs·2025-03-18 02:02Investment Rating - The report indicates a significant downgrade in US growth forecasts, with a revised baseline GDP forecast of 1.7% on a Q4/Q4 basis, down from 2.4% at the start of the year [7] Core Insights - The report highlights two major shifts in macro markets: a downgrade in US growth and an upgrade in fiscal impulse in Germany, challenging the narrative of US exceptionalism and suggesting a more balanced global growth outlook [1][16] - The report emphasizes the potential for US equities to find relief if policy uncertainty is reduced or if economic data remains resilient amid market volatility [1][7] - It discusses the implications of rising policy uncertainty and tariffs on US growth, indicating that the market is now pricing in a higher risk of recession [8][11] Summary by Sections US Growth Outlook - The report notes a sharp downgrade in US cyclical pricing due to weaker data and policy uncertainty, with market pricing reflecting a 150 basis points downgrade to 1-year-ahead GDP growth views [7][10] - It suggests that the current market pricing is still optimistic, with potential for further downside if growth deteriorates more than expected [7][11] Policy Implications - The report discusses the Administration's signals regarding recession risks, which have led to increased market concerns about the effectiveness of policy measures to support growth [8][11] - It indicates that a shift in policy messaging could provide immediate relief to equity markets, emphasizing the importance of clear communication from policymakers [13][35] European Market Dynamics - The report highlights a significant fiscal turnaround in Germany, with GDP forecasts for Germany and the Euro area being raised due to expected fiscal expansions [16] - It notes that the aggressive fiscal response in Germany could shift market expectations and reduce the likelihood of poor growth outcomes in the Euro area [16] Emerging Markets Resilience - The report points out that emerging markets, particularly China, have shown resilience amid tariff impositions, with potential upside if growth targets are met [28] - It mentions that lower oil prices could benefit many emerging markets, supporting local earnings and equities [28] Portfolio Strategy - The report advocates for a diversified portfolio approach, suggesting that gains in non-US equities and US Treasuries can help cushion losses in US equities [32] - It outlines two potential scenarios for the coming months, emphasizing the need for a diversified strategy to navigate varying growth outcomes [32]