Goldman, Deutsche Bank Sound U.S. Recession Alarm

Goldman Sachs released a research report over the weekend, warning that global trade tensions could escalate sharply as the April 2 tariff measures approach. The firm has raised the probability of a U.S. recession in the next 12 months from 20% to 35%—nearly doubling its previous estimate.

At the opening of Asian markets on Monday, all three major U.S. stock index futures tumbled. The Nasdaq has already corrected 15% from its peak, and if the decline continues, it could officially enter a bear market (defined as a 20% drop from its peak).

Ask Aime: How will the U.S. market react to Goldman's recession warning?

Goldman Sachs outlined three main reasons for increasing its U.S. recession probability: First, the firm has lowered its baseline growth forecast for the U.S. economy. Second, recent consumer and business confidence indices have deteriorated sharply. Third, statements from White House officials suggest a greater willingness to tolerate near-term economic weakness to advance policy goals.

Goldman Sachs further noted: "Although consumer confidence data has been unreliable in predicting economic activity over the past few years, we must take the recent decline seriously because the U.S. economic fundamentals are not as strong as in previous years. The notion of 'U.S. exceptionalism' has collapsed over the past month."

The firm expects that President Trump will announce an across-the-board 15% reciprocal tariff on all U.S. trading partners this week, although some products and countries may receive exemptions, ultimately lowering the overall rate.

As the April 2 tariff deadline approaches, goldman sachs has also revised its inflation forecast for the U.S, now expecting the PCE price index to rise 3.5% year-over-year by the end of 2025.

Regarding interest rates, Goldman Sachs predicts that the Federal Reserve will cut rates three times in 2025, specifically in July, September, and November. By the end of the year, the U.S. benchmark interest rate is expected to be in the 3.50%-3.75% range. Due to anticipated economic slowdown, Goldman now projects the U.S. unemployment rate to rise to 4.5% by the end of 2025 and has lowered its GDP growth forecast to just 1.0%.

The firm stated: "Although Federal Reserve officials have downplayed the recent rise in inflation expectations, we believe this will raise the bar for rate cuts. Given the increasing probability of a U.S. recession, the Fed is likely to place greater emphasis on rising unemployment trends in its monetary policy decisions."

Deutsche Bank Sees 50% Probability of U.S. Recession

Goldman Sachs is not alone in its concerns. Another leading investment bank, Deutsche Bank, recently shared a similarly cautious outlook, estimating that the probability of a U.S. recession is close to 50%.

In a survey conducted between March 17 and March 20, Deutsche Bank polled 400 respondents and found that 43% believed the U.S. economy would slow down in the next 12 months. The results indicate significant concern among consumers and business leaders about the possibility of an economic downturn or full-blown recession.