Goldman cuts U.S. recession risk to 15% after Iran deal

Investing.com -- Goldman Sachs has cut its 12-month U.S. recession probability to 15% following the U.S.-Iran agreement, with chief economist Jan Hatzius citing reduced downside risks to the economic outlook and an improvement in underlying labor market resilience.

The 15% figure represents the firm's long-term norm and falls below Goldman's 20% estimate on the eve of the conflict, a gap Hatzius attributed to labor market improvement since then.

Alongside the revision, Goldman nudged its second-half GDP growth forecast up to 2%, reflecting "a positive sequential impulse to real income from lower gas prices, at a time when the economy continues to benefit from the AI boom via higher equity wealth as well as strong capex."

Despite the more constructive tone, Hatzius cautioned that growth would remain moderate, projecting real consumer spending growth of just 1.5% as the boost from higher tax refunds in the second quarter fades.

On inflation, Goldman expects an outright decline in seasonally adjusted consumer prices in June as gasoline prices plunge, with core CPI averaging just 0.17% over the next three months.

On the Federal Reserve, Goldman maintained its baseline forecast of no rate hikes despite a more hawkish-than-expected FOMC under Chair Kevin Warsh, noting that roughly half of the policymakers penciling in hikes are non-voting Federal Reserve Bank presidents.

Goldman also flagged that AI-related stock valuations are "now high even relative to our optimistic views regarding the economic value that is likely to be created by AI over the next decade, so it is getting harder to justify further large gains."

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