Market Pulse April
Our Global Investment Research (GIR) team expects US real GDP growth to slow to 1.5% in 2025 as higher US tariffs weigh on disposable income, consumer spending, business investment, and tighten financial conditions. In the Euro area, GIR expects real GDP growth of 0.8% YoY in 2025 to improve to 1.1% in 2026 as Europe scales up its defense spending and Germany increases infrastructure investment.
GIR expects US core PCE inflation to rise to 3.5% by year-end 2025 as a boost from higher tariffs more than offsets the rebalancing in the auto and housing rental markets. Notably, nearly all survey-based measures of US inflation expectations have risen and the response to tariff news has become more partisan.
As US trade policy continues to evolve, many investors are contending with varying macro and market exposures across economies. Regions with more diversified exports and revenue streams (e.g. Europe, China, Japan) may prove relatively more resilient than those with greater interdependence on the US (e.g. Mexico, Canada).
Source: MSCI and Goldman Sachs Asset Management. As of March 31, 2025. Chart shows the geographic revenue exposure of the MSCI US, MSCI Europe, MSCI Japan, and MSCI APAC ex-Japan indices.
Our colleagues in GIR have updated their 2025 global equity forecasts with Asia leading at +12% total return and +6% from present levels. We expect earnings growth to be relatively consistent across markets as companies defend margins. Higher dividend yields from non-US equities may prove attractive amidst peak policy uncertainty, as fiscal investment outside the US has provided a foundation for international equity multiple expansion.
Relatively range-bound US yields reflect a tug of war between growth and inflation tradeoffs. We think that the market-implied probability of recession-type outcomes is relatively sensible but can rise sharply on genuine evidence of weakness in the hard data. While yields sit on the rich side of GIR’s year-end forecasts, we do not think pricing is at levels that argues for selling duration. Instead, the risk/reward case still favors a long bias.
While the surge in European currencies may have gotten ahead of growth differentials and trade-weighted valuation, GIR has revised their forward currency views to reflect expectations for less US dollar strength over the coming year.
Asset Class Forecasts: Price targets of major asset classes are provided by Goldman Sachs Global Investment Research. Source: “Turning increasingly defensive.” As of April 4, 2025.
Source: Goldman Sachs Asset Management, GIR, and MSCI. As of April 4, 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 page 3 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.
Global Equity Passport
Amid elevated trade and geopolitical volatility, equity markets outside of the US have outperformed on the back of more supportive policy, strong yields, and attractive relative valuations. While we think global markets can still move higher by year-end, disruption – either of the policy or technology variety – creates distinct leaders and laggards. In an environment where uncertainty is high, we believe conviction in security selection is key.
Navigating the Crosswinds
Driven by better growth dynamics and underpinned by solid fundamentals, global equities have outperformed the US and the Magnificent 7 in 2025. But even the macro is micro outside the US. In Europe, accommodative monetary policy and fiscal stimulus could continue to support risk assets despite tariff risks. In Japan, real wage growth and corporate governance reforms may provide tailwinds. Meanwhile China may benefit from AI advancement and fiscal support.
Source: Bloomberg and Goldman Sachs Asset Management. As of April 3, 2025. Chart shows the 2025 year to date returns of the S&P 500 Index, the Magnificent 7 stocks (GOOG, AMZN, AAPL, META, MSFT, NVDA, TSLA), STOXX Europe 600 Index, Tokyo Stock Price Index, MSCI Emerging Market Index, and Hang Seng Index.
Attractive Destinations
This more supportive backdrop may give global equities a competitive edge in the year ahead. In addition to resilient earnings around the world, we see greater multiple expansion outside the US as investors reprice their expectations from US exceptionalism to global convergence. Japan, in particular, still has room to re-rate. Potential tariffs and growth slowdowns remain key risks, but companies with diversified revenue streams and strong balance sheets may still stand out.
Source: Goldman Sachs Global Investment Research. As of March 31, 2025. Chart shows the Goldman Sachs Global Investment Research forecast for 2025 global equity returns based on price-to-equity (P/E) valuation, earnings per share (EPS), and dividend contribution.
The World’s Best Companies are Global Citizens
Even over the last decade of US strength, a majority of the best-performing stocks each year were domiciled outside of the US. Global markets are home to some of the world’s best innovators and wealth creators. Certain emerging markets offer access to strong demographic stories, improved economic policies, and large infrastructure and modernization projects. In our view, investors should focus on the companies with high-quality earnings, secular growth exposure, and relative insulation from trade risk.
Source: MSCI, Bloomberg, and Goldman Sachs Asset Management. As of December 31, 2024. Chart shows what percentage of the best 50 performing companies in the MSCI ACWI are domiciled in the US and outside of the US each year.
“We/Our” refers to Goldman Sachs Asset Management. The economic and market forecasts presented herein are for informational purposes as of the date of this document. There is no guarantee that objectives will be met. There can be no assurance that forecasts will be achieved. Diversification does not protect an investor from market risk and does not ensure a profit. Please see additional disclosures at the end of this document. Past performance does not predict future returns and does not guarantee future results, which may vary.
