Goldman Sachs Lowers U.S. Recession Forecast to 15 Percent Following Iran Agreement

Goldman Sachs has reduced its 12-month outlook for a U.S. recession to 15 percent, a revision driven by the stabilization provided by the recent U.S.-Iran agreement and a noticeably more resilient labor market. Chief economist Jan Hatzius noted that this adjustment returns the probability to the firm's historical norm, further supported by an improved second-half GDP growth forecast of 2 percent. This optimistic outlook is bolstered by the dual tailwinds of lower gasoline prices, which provide a boost to real income, and the ongoing capital expenditure and equity wealth gains spurred by the artificial intelligence boom. While the firm maintains a constructive view on the broader economy and expects a decline in June consumer prices, Hatzius remains cautious regarding the immediate path for consumer spending as tax-related tailwinds subside. Furthermore, Goldman expects the Federal Reserve to hold interest rates steady despite recent hawkish signals from some officials, while simultaneously warning that current valuations for AI-linked equities may be reaching levels that limit further significant upside potential.