After the easing of the China-U.S. trade war, Wall Street quickly tore up "bearish research reports"! Turning optimistic about the U.S. economy and the outlook for U.S. stocks

According to the Zhitong Finance APP, Barclays released a research report on Thursday evening stating that, given the significant easing of tensions in Sino-U.S. trade, the bank no longer expects the U.S. economy to fall into recession in the second half of this year and has significantly raised its growth forecast for the U.S. economy this year. Barclays' team of economists has joined the ranks of major Wall Street firms such as Goldman Sachs and JPMorgan Chase, which have also become more optimistic about the U.S. economy in 2025 and lowered the probability of a recession, while their outlook for the U.S. stock market has become much more positive; Barclays now expects the U.S. economy to grow by 0.5% this year and by 1.6% next year, up from previous forecasts of -0.3% and 1.5% growth, respectively.

On the other hand, as Federal Reserve officials continue to signal the maintenance of current interest rates, and after the two largest economies, the U.S. and China, reached a trade consensus and agreed to significantly reduce each other's tariffs, expectations for a "soft landing" of the U.S. economy have rapidly increased, leading to a noticeable cooling of bets on interest rate cuts by Wall Street financial institutions such as Goldman Sachs.

It is understood that the team of economists from Goldman Sachs now expects the Federal Reserve to begin three rate cuts in December instead of their previous bet of starting in July; economists from Citigroup have pushed back their expectation for the Fed's next rate cut from June to July, while economists from Barclays predict that the Fed will only implement one rate cut in 2025, followed by three 25 basis point cuts next year. Previously, Barclays' economists had expected two 25 basis point cuts this year, to occur in July and September.

Regarding expectations for U.S. economic growth, following the trade consensus reached between the U.S. and China and the agreement to significantly reduce each other's tariffs, Goldman Sachs' team of economists expects the U.S. economy to grow by 1% in 2025, an increase of 0.5 percentage points from their previous forecast, and has lowered the probability of a recession occurring in the U.S. over the next 12 months from 45% to 35%.

In terms of the outlook for the U.S. stock market, it is not just Goldman Sachs that has raised its outlook. From a doomsday perspective to a bullish frenzy, Wall Street's stance has shifted within a month, with major investment institutions like Goldman Sachs collectively tearing up their previously issued bearish reports.

Wall Street veteran and founder of Yardeni Research, Ed Yardeni, recently stated, "This has indeed been a crazy journey of predictions. I rarely change my forecasts, but this time I told clients that I reserve the right to change my predictions based on how often the president changes his mind." After the high-level trade consensus between the U.S. and China, Goldman Sachs also raised its target for the S&P 500 index, setting a 12-month target of 6,500 points, up from the previous forecast of 6,200 points.

After the U.S. and China reached a temporary trade consensus within a 90-day deadline, another major Wall Street firm, JPMorgan Chase, quickly raised its forecast for U.S. economic growth, no longer adhering to its previous prediction that "the U.S., the world's largest economy, will fall into recession in 2025."

JPMorgan Chase's Chief U.S. Economist, Michael Feroli, and others pointed out in a research report on Tuesday: "The U.S. government has recently lowered some of the harsh tariffs on China, which should reduce the risk of the U.S. economy falling into recession this year." "We believe the risk of economic recession still exists, but it has now fallen below 50%."

Economists including Feroli stated that the institution currently expects the U.S. economy to grow by 0.6% in 2025, up from a previous forecast of 0.2%. Meanwhile, a key measure of core inflation—the Personal Consumption Expenditures Price Index (PCE) excluding food and energy—is expected to rise to 3.5%, rather than the previously anticipated 4%.

Regarding the labor market and expectations for Federal Reserve interest rate cuts, JPMorgan stated: "We still expect a slight decline in employment later this year, as the expected slowdown in labor demand will exceed labor supply. Our updated labor market outlook shows that the urgency for immediate action to mitigate employment risks has decreased; for the Federal Reserve, we expect the timing of its return to interest rate cuts to be pushed from September to December."

Additionally, the decrease in uncertainty regarding global trade prospects and the improvement in the economic environment have prompted economists at Barclays to raise their growth forecast for the Eurozone. The institution now expects the Eurozone economy to remain flat (i.e., 0 growth) this year, up from a previous forecast of a contraction of 0.2%. Barclays noted that it still expects a technical and brief economic recession in the Eurozone in the second half of 2025, but the extent of economic contraction will be smaller than previously predicted.

"Overall, we maintain a relatively pessimistic view on the Eurozone's economic growth prospects, as macroeconomic and monetary policy uncertainties remain high, and negotiations between the EU and the U.S. regarding reciprocal tariffs and industry-level tariff policies are still at a technical level, with no signs of progress," Barclays stated in the report