2025 Outlook: Keep on Truckin’

The two key themes that have underpinned Goldman Sachs Wealth Management Investment Strategy Group's (ISG) investment recommendations since the trough of the global financial crisis in March 2009 – “US Preeminence” and “Stay Invested” – remain intact.

In fact, in 2024, the gap between the US and the rest of the world across key economic and financial market metrics widened.

US economic growth outpaced that of other developed economies, achieving an estimated 2.8% growth in 2024, compared to a meager 0.8% in the rest of the developed economies. Moreover, US equities continued to outperform all other major equity markets in 2024, with a total return of 25%, compared to 12% for non-US developed market equities (as measured by the MSCI EAFE index, in local currency) and 14% for emerging markets (as measured by MSCI EM index, in local currency as well).

Overweighting US equities and staying invested have served wealth management clients well over the past 15 years. US equities have outperformed other key regions over this period and staying invested has allowed clients to capture the 11-fold increase in US equities. However, ISG does not expect US equities to outperform non-US equities by the same magnitude; nor do they expect US equities to replicate the high absolute returns observed in recent years.

Here are a few more takeaways regarding the global economy from the report.

Steady, above-trend global growth

ISG expects global economic growth to reach 3.1% in 2025, compared to its 2.9% trend rate. ISG believes the US will grow at 2.3%, propelled to above-trend growth by the momentum of 2024. Japan will likely grow above trend, but the Eurozone and the UK will likely record a third consecutive year of below-trend growth.

While emerging market countries together will grow slightly above trend, there will likely be some dispersion among the BRICS countries – Brazil, Russia, India, China, South Africa – with Russia growing slightly above trend due to war efforts, China also above trend, and Brazil and India around or just below trend.

Monetary policy easing

ISG believes that most major central banks in developed economies will continue the easing policies started in 2024. Japan, on the other hand, will likely slowly raise rates, continuing the policy that ended its negative interest rates.

In emerging markets, ISG expects China will continue to support its economy by easing monetary policy to supplement its multipronged fiscal stimulus launched in 2024. ISG believes India might have room for modest easing, while Brazil will raise its policy rate further to combat inflation. Russia faces a dilemma in which it is inclined to raise rates to fight inflation but may have to ease modestly in the second half of 2025 to support growth.

Recession risk in the US

ISG probability of a US recession over the year ahead is 20%, which is slightly above the unconditional probability of recession of about 18% since World War II.

Significant geopolitical risks

We face a period of significant geopolitical risks – possibly the greatest since the inception of ISG in 2001. The biggest risk is a deterioration in US-China relations because of an escalation in the trade war, China’s more aggressive maneuvers toward Taiwan and its more aggressive cyber activities in the US. ISG expects some progress toward peace in the Middle East, with some de-escalation from Iran, but uncertainty about Russia remains. ISG does not believe the US debt trajectory is a near-term risk.

Read more of Goldman Sachs Wealth Management Investment Strategy Group’s 2025 outlook here.