Goldman Sachs: Significant downward revision of forecasts!
Goldman Sachs announced on March 31 that it has made significant downward adjustments to its forecasts, expecting the United States to implement an average 15% reciprocal tariff starting April 2, which may have a negative impact on the market. The forecast for core personal consumption expenditures in the U.S. for 2025 has been raised to 3.5%, while the GDP growth forecast has been lowered to 1%, and the unemployment rate has been raised to 4.5%. The probability of an economic recession in the next 12 months has increased to 35%. The 3-month and 12-month return rate forecasts for the S&P 500 index have been lowered to -5% and +6%, respectively
On March 31, Goldman Sachs' trading desk stated in a "Quick Interpretation" that, "This weekend, we made significant downward adjustments to our forecasts, which is quite a notable change after a long time." Let's take a closer look:
1. Tariffs
Goldman Sachs expects that starting April 2, the United States will implement an average reciprocal tariff of 15% on all trading partners (which will eventually decrease to 9%).
In addition to the tariffs already imposed and additional industry tariffs, this will raise the total tariff level by an additional 15 percentage points compared to Goldman Sachs' previous estimate of a 10 percentage point increase.
Goldman Sachs believes this will bring negative unexpected shocks to the market: The recent survey by the Group of International Monetary and Financial Committees (GIR) shows that ordinary investors expect the actual tariff rate to increase by about 9 percentage points this year; only a very small number of investors (4%) expect an increase of 15 percentage points or more.
2. U.S. Situation
Raised the core Personal Consumption Expenditures (PCE) forecast for the end of 2025 from 3.0% to 3.5%.
Lowered the GDP growth forecast for the fourth quarter of 2025 year-on-year by 0.5 percentage points to 1%.
Raised the unemployment rate forecast for the end of 2025 by 0.3 percentage points to 4.5%.
Increased the probability of a U.S. economic recession in the next 12 months from 20% to 35%.
Expect the Federal Reserve to implement "preventive rate cuts" in July, September, and November this year.
3. S&P 500 Index
Lowered the 3-month and 12-month return rate forecasts to -5% and +6%, corresponding to index points of approximately 5300 and 5900.
Based on historical patterns of stock market recessions, the S&P 500 index could decline by about 25% from recent market peaks; if a 35% recession probability materializes, it could drop to a low of about 4600 points from current prices, potentially falling another 17%.
4. European Situation
Higher tariffs will further reduce the Eurozone's real GDP by an additional 0.25%, bringing the total GDP decline to 0.7%.
Goldman Sachs now predicts weak economic growth for the remainder of 2025, with non-annualized growth rates of 0.1%, 0.0%, and 0.2% for the second, third, and fourth quarters, respectively.
Expect the European Central Bank to cut rates in April, June, and July (with the addition of a July rate cut), ultimately lowering the rate to 1.75% (previously 2%)