Goldman Sachs presents an optimistic outlook for the economy in 2025, predicting several factors that could buoy markets and economic health.
The U.S. economy is anticipated to exceed current growth expectations. Goldman Sachs forecasts an impressive 2.4% GDP growth year-over-year by the fourth quarter of 2025, surpassing the consensus estimate of 2%. This growth is largely driven by consumer spending, predicted to increase by 2.3% annually, fueled by a robust job market and wealth from stock holdings.
Business investments are set to rise significantly, with Goldman predicting a 5% increase in private investments, outpacing the expected 3%. Factors contributing to this rise include spending on new factory equipment supported by federal acts, tax incentives, increased business confidence, and lower borrowing rates for small businesses.
The job market is expected to improve with unemployment potentially dropping to 4% by the end of 2025. High job openings and strong demand for labor, despite a slowing immigrant labor supply, are expected to strengthen employment figures.
The Federal Reserve might reduce interest rates more than currently anticipated. Goldman expects rate cuts in March, June, and September, suggesting a more aggressive easing than current forecasts predict, spurred by declining inflation and potential policy shifts under a second Trump administration.
Inflation is projected to continue its downward trend. Core personal expenditures inflation is expected to decrease to 2.1% from the current 2.8%. This decline is attributed to the end of ‘catch-up inflation’, cooling rent and car insurance prices, and slower wage growth, which is down from 4.7% in 2023 to 3.9% over the last year.
Overall, Goldman Sachs remains optimistic about the market’s performance, predicting a potential rise in the S&P 500 to 6,500 by 2025, indicating a 10% increase from current levels.
Source: Businessinsider
