Finimize - 🎊 In with the new

What’s going on here?

A good time for the US economy means a good time for global investors, and Goldman Sachs sees a shiny year ahead.

What does this mean?

The investment bank predicts that the US economy will grow by 2.5% in 2025. And while that’s less burly than the 2.8% it saw in 2024, that healthier expansion was thanks to some once-in-a-while factors – like falling interest rates, higher wages, and lower inflation. The bank’s experts say that 2025 will have its share of good stuff too: they see the Federal Reserve’s (Fed’s) preferred consumer price gauge falling to just 2.4% by the end of 2025. And with that being just a shade over the central bank’s target, they argue that you can expect the Fed to park its key interest rate in the 3.25% to 3.5% range by this time next year.

Why should I care?

The bigger picture: Looking on the bright side.

Goldman’s economists might, admittedly, be wearing rose-colored glasses. Their forecasts assume that new high US tariffs hit only China and auto imports, which would create a far smaller drag on global economic growth than you’d get with 10% or 20% across-the-board ones. But it’d jack up inflation nonetheless: without new tariffs, Goldman estimates that core inflation would fall right in line with the Fed’s 2% target. The bank also assumes that any change in immigration policy won’t cause major disruption in the US labor market, which it sees holding steady. And that’d be good news for businesses and consumers. A stable employment scene, potential tax cuts, a pick-up in government spending, and more relaxed regulations just might boost business confidence and spending across the board.

What’s going on here?

2025 will likely be a year of lower returns, higher risk, and a need for more balance. But against that backdrop, there’ll be opportunities too.

What does this mean?

As any good fable reader knows, slow and steady wins the race. And that may be the lesson for this coming year. Global economic growth is forecast to be stable, but not speedy, while inflation and interest rates are expected to continue to slide. That said, share valuations look expensive – and geopolitical tensions could throw some curve balls. So there’s a strong case to be made for continuing to bet on global stocks, using government bonds as a buffer, and holding commodities like gold for diversification. When it comes to stocks, remember that the US market is the biggest – and therefore the most important. And as Goldman Sachs will happily tell you, the year to come isn’t likely to be a bad one in that market. The investment bank sees the S&P 500 hitting 6,500 by the end of 2025, with US economic momentum driving a healthy 11% bump in earnings and stock valuations holding more or less steady.

Why should I care?

For markets: Yep, things could still go wrong.

Stocks have factored in an optimistic 2025, and their punchy valuations mean any disappointment could have a butterfly effect. So you’ll want to watch for any letdowns in economic growth or inflation, and keep your eyes peeled for any big, risky events – things like trade disputes, currency wars, or major debt troubles.

Zooming in: You’ve got options.

Some experts recommend that investors use options to take advantage of periods of low volatility. That means looking to score wins on the upside in stocks or protecting your portfolio against their downside. You might take a look at equity put spreads in case of a US stock market drop, gold and US dollar call options if geopolitical risks ramp up, put options on China-exposed assets if the US imposes stiff new tariffs, or calls on European and Chinese stocks in case either or both economies take a surprisingly strong turn.