Baseball players always know when they hit the sweet spot.
At this point, the bat connects with the ball with great force and little vibration, and the ball takes off.
Time is limited! Get a free quarterly call with TheStreet Pro. Expert analysts and fund managers share their 2025 strategies. Start your free trial today
This expression has transcended America’s national pastime to mean the best point or combination of factors or qualities.
As Donald Trump was sworn in as the 47th president of the United States, Goldman Sachs chief economist Jan Hatzius said the U.S. economy was in a sweet spot of healthy growth and gradual deflation.
“We estimate real GDP growth at 2.6% in the fourth quarter and expect a similar growth rate in 2025,” he said in a research note.
Related: Vanguard analysts release 2025 inflation, economic and stock market forecasts
“Our prediction is [0.5 percentage point] That’s above the latest Bloomberg consensus, partly because we remain more confident than others that real personal disposable income will grow steadily in 2025 and partly because of strong forecasts for business investment,” he added.
Hatzius noted that Goldman Sachs is not performing well above consensus as it has been for much of the past two years. That’s because other forecasters have become more optimistic given the continued strength of the data and, in some cases, high expectations for positive growth in Trump’s agenda.
Jim Watson/Getty Images
Other voices optimistic about the U.S. economy
Others have similarly high expectations, including prominent investor Stanley Druckenmiller, who told CNBC, “We may be going in the opposite direction from the most anti-corporate government.”
More Stock Market Predictions for 2025
- Santa Claus rally fails to materialize, stock market faces correction risk
- The Right Pick for Palantir as Best Stock of 24 Years Veteran Trader Reveals Best Stock of 25 Years
- 5 quantum computing stocks for investors to target in 2025
- Goldman Sachs chooses the industries worth owning in 2025
“We have a lot of conversations with local CEOs and companies,” he said. So we are believers in animal spirits.
Stephen Guilfoyle, a veteran Wall Street analyst, wrote in an article for TheStreet Pro that he would try to remain apolitical in public, but he was still concerned that “Treasury now gets rid of its former Treasury secretary.” Janet Yellen” expressed gratitude for screwing up the federal debt deadline. Either incompetent or reckless, or both. “
“She could have pushed back the deadline,” said Guilfoyle, also known as “The Sergeant,” whose career stretches back to the 1980s at the New York Stock Exchange. “She would rather leave unnecessary chaos to her successor.”
Bank of America Securities analysts Ebrahim Poonawala and Brandon Berman said Wall Street will be looking for validation that “around client activity has been strong” following a Trump victory and the Fed’s interest rate cuts. “Reviving optimism” is “starting to show.”
They believe that M&A activity and initial public offerings have driven this rebound, “followed by a rebound in loan demand in mid-2025.”
Analysts at B of A believe that net interest margin expansion may be greater than expected “in the context of a positive slope in the yield curve.”
They anticipate “M&A interest from management teams” given the prospect of less regulatory restrictions from the new government.
Inflation and interest rates in 2025
Inflation was a major issue during the presidential campaign. Goldman Sachs’ Hatzius said that while there is a gradual downward trend, this trend is occasionally obscured by month-to-month fluctuations, infrequent category catch-up with price adjustments, and difficulties in the post-epidemic seasonal adjustment process.
Last month, Fed officials cut interest rates for the third and final time in 2024. CME’s FedWatch sees the possibility of a rate cut in January as almost zero, with a slim chance of a rate cut before June.
“We are confident in two aspects of the U.S. monetary policy outlook: a) there will be no rate cuts at the January FOMC meeting; and b) there is no risk of meaningful rate hikes in the near term,” Hatzius said. “It’s ambiguous because a rate cut looks reasonable given the ongoing deflation, but it’s not necessary given the strength of the real economy.”
“Nevertheless, we strongly believe that the market is pricing in an overly hawkish view from a probability-weighted perspective,” he said.
Related: Fidelity analysts release market forecasts for 2025
In October, Goldman Sachs predicted that the Federal Reserve would continue to cut interest rates, with the final interest rate reaching 3.25% to 3.5%.
Goldman Sachs’ current baseline forecast is for two 0.25 percentage point interest rate cuts in June and December this year, followed by one rate cut in 2026, with a final interest rate of 3.5-3.75%.
“But the risks to this forecast tilt toward the net downside, both because the FOMC could decide to cut rates before June even if the economy performs well, and because the FOMC could decide to cut rates before — if economic data or risk sentiment deteriorates sharply. situation,” Hatzius said.
Goldman Sachs: Tariffs are key issue
He said the key question in the coming months is how aggressively the Trump administration will implement its tariff agenda.
“We expect an increase in average tariffs in China [20 percentage points] Aggressive tariffs on European and Mexican cars will be announced in the next one to two months [electric vehicles],” he said.
Hatzius said the outlook outside these areas is changing somewhat, with across-the-board tariffs becoming less likely and widespread tariffs on key goods becoming more likely.
RELATED: Analysts restart Fed rate forecasts after surprising inflation data
“All of this is still in flux, and tariff news may continue to cause volatility in financial markets,” he added. “However, the ultimate impact of tariffs on Fed policy is more double-edged than generally believed. After all, the intensifying trade war in 2018-2019 set the stage for the Fed to cut interest rates three times, by 0.25 percentage points each time.”
While many commentators have suggested that this was in an environment of below-target inflation compared to above-target inflation now, Hatzius noted that “in fact, [Federal Funds Rate] It is now above neutral (vs. below neutral then) and labor market utilization is lower.
Related: Veteran money manager issues dire warning for S&P 500 in 2025
