Goldman Sachs has altered its recession outlook following an announcement from President Donald Trump regarding a 90-day suspension of most new tariffs from the administration, providing some reassurance to markets concerned about trade tensions.
Earlier on Wednesday, analysts at Goldman had adopted a recessionary perspective after introducing new country-specific tariffs. However, post Trump’s announcement, the firm revised its outlook to a “non-recession baseline,” predicting modest GDP growth of 0.5% by the fourth quarter of 2025, as well as three anticipated rate cuts from the Federal Reserve beginning in June, as reported by CNBC.
The market reacted swiftly, with Bitcoin climbing above $82,000. The Nasdaq index was close to a 10% increase, bouncing back from its steepest multi-day decline since the financial crisis of 2008. Additionally, the yield on the 10-year Treasury note dropped from 4.5% to 4.4%.
Trump shared via Truth Social that several countries had started discussions regarding trade and currency, leading to the decision to pause tariffs and a temporary cut in the reciprocal tariff rate to 10%. However, tariffs on imports from China were increased to 125%, effective immediately.
Goldman now estimates a 45% likelihood of recession and anticipates core inflation peaking at 3.5%, according to their latest communications with clients.
This unexpected decision followed four days of significant market fluctuations and rising concerns about a potential global recession. Treasury Secretary Scott Bessent is set to lead forthcoming trade discussions, a move that Wall Street views favorably given his moderate perspective.