In a surprising turn of events, Goldman Sachs has modified its recession forecast, directly linked to President Donald Trump’s recent announcement of a 90-day pause on new tariffs. This decision has brought calm to the turbulent financial markets, which were previously on edge due to escalating trade war concerns.
Initially, Spencer from Goldman Sachs had expected a recession following the implementation of additional country-specific tariffs. However, the administration’s sudden tariff pause has shifted the firm’s outlook dramatically to a non-recession baseline, predicting a modest GDP growth of 0.5% by the fourth quarter of 2025.
- In light of these changes, analysts now forecast three anticipated Federal Reserve rate cuts starting in June.
- The rapid response from the market has been palpable, with Bitcoin surging to over $82,000, while the Nasdaq indices showed significant gains.
- The 10-year Treasury yield has also eased, dropping from 4.5% to 4.4%.
Trump, via his Truth Social platform, noted that discussions over trade and currency with multiple countries prompted the decision to pause tariffs and reduce reciprocal tariffs to 10%. However, the administration quickly raised tariffs on Chinese imports to an unprecedented 125%.
Goldmus Sachs now estimates a 45% chance of recession while projecting core inflation to peak at 3.5% accordance with their latest client note. This reassessment comes after four days of intense market volatility, prompting the engagement of Treasury Secretary Scott Bessent to head upcoming trade negotiations—a move applauded by market analysts due to his moderate approach.
As the global economy responds to these shifts, investors and traders are watching the financial landscape closely, particularly in the cryptocurrency sector, which has seen notable fluctuations directly correlated to these developments. The interplay between government policy and market reactions continues to be a point of analysis for economists and financial experts alike.
