Following trade tensions amid the announcement of reciprocal tariffs by U.S. President Donald Trump, economists from major investment banks have revised their projections on recession odds, economic growth, and inflation trajectories.
Goldman Sachs have increased the prediction of a potential U.S. recession, raising the likelihood to 45% from a previous estimate of 35%. This marks their second adjustment in a week, having initially boosted the chance from 20%. Additionally, the bank also revised its forecast for U.S. GDP growth this year to 1.3%, down from 1.5%, and cautioned about the possibility of a bear market.
Concurrently, other experts echo these concerns, with Wells Fargo forecasting a 1% growth rate for the U.S. economy in 2025, while JPMorgan estimates a 60% chance of recession both in the U.S. and globally.
Moreover, JPMorgan anticipates U.S. inflation will rise to 4.4% by year-end from its current 2.8%, attributed to the recent tariffs.
As per a report by Sky News, a meeting was held last Sunday by top executives from major banks like Bank of America, Barclays, JPMorgan, Citi, and HSBC Holdings to address the turmoil indicated by falling equity markets amid global recession anxieties.
A source stated that the purpose of the call was to give U.S. bank executives the opportunity to communicate their perspectives on the emerging tariff unrest to their global counterparts.
In a letter released on Monday, JPMorgan CEO Jamie Dimon expressed hope that, following negotiations, the tariff situation might eventually yield some positive outcomes for the U.S., but voiced serious concerns regarding the potential impact on America’s long-term economic alliances.
As for future monetary policy, there is now a 55% probability of an interest rate cut at the May FOMC meeting, according to CME FedWatch Tool. Nonetheless, Morgan Stanley believes the Federal Reserve will hold off on cutting rates until next year due to inflationary pressures from tariffs.
Furthermore, BlackRock adjusted its stance on U.S. equities from ‘Overweight’ to ‘Neutral’ for the next three months, citing anticipated increased pressure on risk assets due to intensifying global trade tensions.
