Major financial institutions — including Goldman Sachs, JPMorgan, and Barclays — have revised down their U.S. recession odds after the United States and China agreed to a 90-day tariff truce. Goldman Sachs, for example, reduced its estimated probability of a U.S. recession from 45% to 35% and raised its forecast for U.S. GDP growth in 2025 to 1%.
Alongside these growth updates, the banks have also pushed back expectations for Federal Reserve rate cuts. All three now anticipate only a single rate cut, expected in December 2025, rather than earlier easing. In addition, Goldman Sachs increased its year-end S&P 500 target to 6,100 points, reflecting a more optimistic market outlook on the back of eased trade tensions.
Analysts say the temporary tariff pause lowers near-term downside risks to global growth by reducing the chance of a further escalation in trade barriers between the two largest economies. That change in the risk landscape has led major banks to modestly improve growth forecasts and to recalibrate monetary policy timing, while still noting significant uncertainties remain. Key factors to watch include whether the truce is extended, the pace of economic data in coming quarters, and the Fed’s assessment of inflation and labor-market conditions.
Although forecasts have improved, the institutions emphasize that upside and downside scenarios are both possible. The revised outlooks reflect a balance between positive developments from reduced trade friction and persistent macroeconomic risks such as tight labor markets, elevated inflation relative to pre-pandemic norms, and geopolitical uncertainties that could influence commodity prices and investor sentiment.
In markets, the expectation of a single delayed rate cut supports higher equity valuations by keeping financing conditions relatively stable for longer. That dynamic helps explain why some strategists have raised long-term stock targets, while also warning investors to remain prepared for volatility if data or policy signals shift. Overall, the tariff truce has prompted a cautious but more optimistic reassessment of growth and policy timelines among major U.S. and global banks.