Market Pulse March
Goldman Sachs Global Investment Research (GIR) expects solid global real GDP growth of 2.7% in 2025 with the US likely to outpace its developed market peers given stronger productivity growth. The swing factor for many economies is likely to be US policy and their respective tariff sensitivities.
We expect global core inflation to fall gradually by year-end 2025 (GIR forecast: 2.6%) on the back of a further decline in shelter inflation and steady wage disinflation, offset by a boost from US tariffs. While underlying inflation trends remain favorable, the variability of potential tariffs may temporarily spike US core PCE inflation anywhere between 50-100 bps.
Economic Policy Uncertainty is elevated, reflecting the risks of higher tariffs in coming months. Increased tariff rates could have significant US growth and inflation impacts, though we would expect larger growth drags in Europe and China. While the growth/inflation mix will be nuanced in 2025, modestly restrictive monetary policy leaves the door open for the Fed to deliver two 25bp cuts this year (June and December), followed by another 25bp cut in 2026 (June) to a terminal rate range of 3.5-3.75%.
Source: Goldman Sachs Asset Management. As of February 26, 2025. Chart shows the US Daily Economic Policy Uncertainty Index on a 5-day rolling average, which is based on newspaper coverage of policy-related economic uncertainty, tax code expiration data, and economic forecaster disagreement.
The relative strength of non-US equities in 2025 is not that surprising. In our view, investors came into the year too optimistic about the continuation of the US trends that have defined the past decade, while they were too bearish about the global opportunities that had long underperformed, leaving a greater opportunity for global diversification to boost risk-adjusted returns. For the next dollar invested, we would continue to broaden equity market exposure down in cap and across geographies.
Valuation considerations and the level of Treasury term premia continue to support the case for US duration as a hedge, even if our baseline does not argue for a particularly deep rally in long rates. We also see opportunities to position for a steeper curve, find value in structured products, and roll down IG credit.
Our colleagues in research raised their 2025 gold price forecast to $3,100 on structurally higher central bank demand. However, if policy uncertainty stays elevated, speculative positioning could push gold prices as high as $3,300.
Price targets of major asset classes are provided by Goldman Sachs Global Investment Research. Source: “Momentum selloff, Value outperforms.” As of March 3, 2025.
Source: Goldman Sachs Global Investment Research and Goldman Sachs Asset Management. As of February 28, 2025. “We/Our” refers to Goldman Sachs Asset Management. The macro and market views expressed may differ from those of GIR and other divisions of Goldman Sachs and its affiliates. See the end of the page for additional disclosures. The economic and market forecasts presented herein are for informational purposes as of the date of this document. There can be no assurance that the forecasts will be achieved. Past performance does not predict future returns and does not guarantee future results, which may vary.
Policy Pivots
Every change in administration creates change in policy. So far in 2025, the Trump administration has been swift to act on key focus areas such as trade, immigration, and deregulation. From a macro perspective, these policy pivots pose two-sided risks to both the growth and inflation outlook. For markets, they amplify tail risks and reinforce the need for disciplined investment strategies. In our view, diversification across and selectivity within asset classes will prove critical for navigating today’s ever-changing policy picture.
An Assortment of Tariff Scenarios
President Trump has proposed more tariffs during his first month in office than during his entire first administration. We estimate that more than $1.9 trillion in goods are subject to potential tariffs, with a particular focus on critical imports such as industrial materials, semiconductors, and pharma. The US Trade Representative and Department of Commerce are undertaking a holistic review of US trade with a report due at the beginning of April. We expect more details, including effective tariff dates, to be announced at that time.
Source: Goldman Sachs Asset Management. As of February 28, 2025.
A Micro-Driven Market
Policy uncertainty widens the tail risk in today’s market. We expect equity performance to continue to be driven more by the micro – earnings, margins, and fundamentals – than macro beta, sector, size, or valuation. As such, we think companies with secular growth potential, quality earnings, and strong balance sheets will earn a premium. While this year will likely see more episodes of policy-induced volatility, as long as the macro backdrop remains resilient, we would see market pullbacks as potential opportunities.
Source: Goldman Sachs Global Investment Research and Goldman Sachs Asset Management. As of December 31, 2024.
Potential Beneficiaries of Policy Risk
With 49% of their revenues derived from outside of the US, today’s large multinational tech companies are particularly vulnerable to reciprocal tariffs and further dollar strength. This creates potential opportunity for domestically focused companies to catch up from both an earnings and performance standpoint, especially as protectionist policy tends to direct consumer spending locally. Still, in a world with increasing risks, selectivity will be essential, in our view.
Source: Goldman Sachs Global Investment Research and Goldman Sachs Asset Management. As of December 31, 2024.
