After a temporary tariff truce with China raised prospects of some easing in the global trade war, Goldman Sachs became the first big brokerage to lower its recession projection for the US from 45 percent to 35 percent.
For 90 days, the US and China agreed to drastically slash tariffs on each other's imports. The US would reduce its charges on Chinese products from 145 percent to 30 percent, while China will reduce its duties on US imports from 125 percent to 10 percent.
Additionally, on a quarterly basis, the brokerage increased its prediction for US GDP growth in 2025 by 0.5 percentage points to one percent.
Goldman had previously predicted three rate cuts this year, but now only anticipates one in December. Two more cuts are planned for March and June of 2026.
Goldman also increased its prediction for U.S. GDP growth in 2025 by 0.5 percentage points to one percent.
Goldman Sachs also increased the year-end goal for the S&P 500 index from 5,900 to 6,100 points, citing decreased chances of a recession and tariffs.
Early this week, the index closed at 5,844.19 points.
In the meantime, Citigroup stated that it has moved its rate-cut projections from June to July.
According to Goldman, the goal of rate cuts had changed from offering insurance to normalizing policy since economic growth was more robust than anticipated, unemployment was increasing more slowly, and there was less need for policy support.
Due to its market power and access to up-to-date economic data, investors and policymakers keep a careful eye on the bank's opinions.
Revisions have also been made to the recession risk estimates of other big banks.
Morgan Stanley has held with its more optimistic projection of 30 percent, while JPMorgan Chase has reduced it to 40 percent.
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Citing worries about inflation and the unpredictable consequences of monetary tightening, Bank of America maintains its 50 percent chance forecast.