Goldman Sachs 2025 Forecast: Is it Accurate?
As we head towards the end of the year, we’re seeing things unfold pretty much as expected. The post-election rally has been checked off, we’ve hit 6,000 for the S&P 500 (SPY), and small caps are starting to outperform – it’s all happening! Now, let’s dig into Goldman Sachs’ updated post-election 2025 Outlook to see how it aligns with my view.
According to Goldman’s updated outlook, the US economy is in a good place. Recession fears have eased, inflation is moving back towards 2%, and the job market is strong. Goldman Sachs Research predicts that US GDP will grow by 2.5% for the full year, compared to the consensus forecast of 1.9% by economists surveyed by Bloomberg. I’m on board with this assessment too, as long as tariffs don’t increase as much as expected.
It’s important to note that tariffs could have an impact on inflation, but the Goldman team doesn’t seem too worried. They forecast that core PCE inflation, excluding tariff effects, will decrease to 2.1% by the end of 2025. While tariffs could push this measure of inflation to 2.4%, they believe it would be a one-time price level effect.
In terms of the likelihood of a US recession, Goldman Sachs Research suggests a 15% chance in the next 12 months, which is in line with historical averages. Given the solid economic foundation, the chances of a recession or bear market are minimal.
Looking ahead, the Fed Meeting Minutes indicate a potential rate cut at the December 18th meeting. Bond investors are now betting with a 60% probability for a 25 basis point cut, up from 52% before the announcement.
In summary, Goldman’s 2025 outlook aligns well with my own. As we gear up for the next year, we anticipate a somewhat subdued S&P 500, following a typical pattern of strong initial returns followed by a less exciting third year. However, for those seeking outperformance, focusing on healthy small and mid-cap stocks may be the way to go.
Our portfolio has seen a significant gain year-to-date, and we remain optimistic about the prospects ahead.
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Wishing you all the best in your investment journey!