Investment Rating - The report maintains a cautious outlook on the economic environment, indicating a potential shift from "concern" to "reality" regarding recession risks, with the Federal Reserve's ability to lower interest rates being constrained [3]. Core Insights - The Federal Reserve's decision to keep the federal funds target rate in the range of 4.25%-4.50% reflects ongoing economic uncertainties, particularly related to inflation and growth forecasts [3]. - Economic growth forecasts for 2025, 2026, and 2027 have been revised downwards by 0.4pct, 0.2pct, and 0.1pct respectively, with the 2025 GDP growth now projected at 1.7% [3]. - The unemployment rate forecast for 2025 has been adjusted upwards to 4.4%, while the core PCE inflation forecast has been raised to +2.5% [3]. - The report highlights concerns over inflation driven by tariffs and the impact of Trump's policies on economic growth, suggesting a negative outlook [3][4]. Summary by Sections Economic Outlook - The Federal Reserve's recent meeting emphasized increased uncertainty in economic prospects, with a notable shift in the tone of the statements regarding inflation and growth risks [3]. - The updated economic projections indicate a significant downward bias in growth forecasts and an upward bias in unemployment rate predictions [3][8]. Inflation and Monetary Policy - The report discusses the impact of tariffs on inflation, suggesting that while recent strong commodity inflation readings reflect tariff-induced price increases, the Fed remains cautiously optimistic about the long-term inflation outlook [3][4]. - The Fed's ability to lower interest rates is limited, which may accelerate the transition of recession risks from concerns to reality [3]. Sector Recommendations - Gold is recommended as a strong investment opportunity, with expectations of price increases driven by a potential "hard landing" in the U.S. economy and a renewed Fed easing cycle [4]. - The pharmaceutical sector, particularly innovative drugs, is seen as having upside potential due to the Fed's easing cycle, with expectations of improved revenue in the medium to long term [4]. - U.S. equities are viewed as facing downward adjustments due to increasing economic risks and uncertainty in earnings growth [4].