Smart Finance APP learned that Goldman Sachs Asset Management department, a financial giant on Wall Street, released a 2025 global investment outlook report titled "The Reasons for Recalibration". This new report from Goldman Sachs Asset Management department shows that benchmark interest rate cycle, geopolitical risks, and the post-election Trump administration's 'MAGA' policy give investors reasons to readjust their investment focus.

Having been dubbed the 'bull market leader' in major asset classes such as stocks, bonds, and commodities, Goldman Sachs points out in this report that adopting a broad, diverse, and global investment toolkit both in public and private markets helps achieve positive investment outcomes and mitigate risks.

Goldman Sachs indicates that global investors have ample reasons to enter the bond market in 2025, expand their equity investment horizons, explore alternative paths, and capture opportunities amid potential market turbulence. The core reasons given by Goldman Sachs include the imminent 'soft landing' of the US economy, significant late-stage investment opportunities, and ongoing tail risks. Goldman Sachs is positive about the trends in the US stock and bond markets in 2025, firmly believing that the US stock and bond markets will enter an upward trajectory in 2025, with the S&P 500 index expected to reach 6,500 points, exceeding the previously estimated 6,300 points by Goldman Sachs. As of Thursday's US market close, the S&P 500 index closed at 5,948.71 points.

Looking at the global macroeconomic outlook, Goldman Sachs states that the slowing growth of the UK economy and the normalization of inflation may lead to a faster rate cut in benchmark interest rates. Major global central banks such as the Bank of Canada and the Swedish Riksbank are also shifting towards a more dovish stance. Japan, on the other hand, remains an exception and may accelerate rate hikes to counteract yen depreciation and domestic price and wage increases.

With the Fed embarking on an interest rate cut cycle, the possibility of a prolonged accommodative policy stance in 2025 may also pave the way for emerging market central banks to pursue accommodative policies, expanding the monetary policy space for central banks. Goldman Sachs mentions that emerging markets' economic growth and stock markets still display relative resilience, especially with the overall inflation rate of emerging markets far below the peak of 2022.

US bond market outlook

Goldman Sachs expects the U.S. bond market in 2025 to potentially experience an investment frenzy due to changes in interest rates and macroeconomic and fundamental factors such as corporate credit conditions, especially with a shift from cautious large cash assets to bonds as fixed income assets benefiting from rate cuts.

"Historical data shows that when the Federal Reserve begins a rate-cutting cycle, the bond market is where investors should pay more attention." Goldman Sachs' asset management department stated in a report. Goldman Sachs indicates that in 2025, investors transitioning from cash assets to bonds and other fixed income assets could achieve more significant returns, potentially leading to widespread appreciation of fixed income assets. "Proactive investment strategies, diversification, and robust execution of risk management will be crucial."

Although the U.S. election has expanded the range of economic outcomes, Goldman Sachs still anticipates that the Federal Reserve will choose consecutive rate cuts in December and early 2025, with the possibility of further cuts afterward, albeit possibly at a slower pace. The main risk in fixed income is if the U.S. sees a significant increase in inflation, which could slow down the Fed's easing pace, prompting the Fed to pause rate cuts for a long period to assess economic data.

"Our analysis indicates that companies in the investment-grade credit market can maintain resilience in bond price appreciation in 2025, just as they have shown strong resilience to rising rates in recent years. This reflects a good starting point for credit indicators and the ability to be more selective in new investment directions or large-scale M&A activities." Goldman Sachs' fixed income strategy head, Simon Dengor, stated.

Goldman Sachs states that healthy corporate credit indicators suggest that U.S. companies have enough resilience to withstand economic fluctuations. Against the backdrop of falling interest rates, companies can proactively adjust their capital structure (such as issuing new bonds or repaying old debt early) and selectively allocate capital in favorable market conditions; at the same time, investors in the U.S. benchmark rate may continue to decline. In this context, by selecting quality bond assets (such as investment-grade bonds or high-yield green bonds), investors can achieve optimized fixed income asset returns and risk control.

"Investment-grade bonds as a choice to enhance portfolio return will stand out in finding a balance between earning profits and managing risks." Lindsay Rosner, head of multi-strategy fixed income at Goldman Sachs Asset Management, added.

Goldman Sachs also believes that the green bond market is one of the fastest-growing segments in the fixed income asset field, offering ample opportunities to earn profits with higher yields.

U.S. stock market

Goldman Sachs stated in the report that the US stock market remains the most attractive: "In 2025, adopting a comprehensive and differentiated investment strategy in the US large and mid-cap sectors may bring positive returns." Other Wall Street wealth management institutions such as Pictet Asset Management are also bullish on the US stock market in 2025.

"With interest rate cuts and more promotion of domestic trade policies, US small-cap stocks may be at a turning point. When the central bank starts cutting interest rates, especially during an economic slowdown, small-cap stocks often outperform large-cap stocks, and with continuous interest rate declines, small-cap stocks may continue to benefit from the rate-cutting cycle." Gregg Tuttle, head of small to mid-cap stocks at Goldman Sachs' Asset Management department, stated.

Goldman Sachs predicts that global stock markets still have upward potential, as corporate profits will continue to show strong growth and benefit from a series of Trump administration new policies favorable to US companies such as tax cuts and regulatory easing. The report predicts that in the next 12 months, the S&P 500 index is expected to rise to 6500 points, higher than the agency's previous 6300 points. This forecast coincides with another major Wall Street firm Morgan Stanley, with the institution's chief bear Wilson recently turning bullish on US stocks, stating not to worry about high valuations, and that the S&P 500 will reach around 6500 points by the end of next year.

BMO Capital Markets' expectations for the US stock market ranks among the most optimistic on Wall Street, with the institution expecting the S&P 500 index to reach 6700 points by the end of 2025. Evercore ISI provided an even more optimistic forecast, anticipating that by mid-2025 (June next year), the S&P 500 index will rise to 6600 points. Evercore ISI stated that the prospect of regulatory relaxation supports the US stock market, "We believe prosperity is around the corner; when elected President Trump will quickly take active policy measures to stimulate economic growth, the stock market will also rise rapidly."

On Wall Street, including giants like Goldman Sachs, JPMorgan, and Morgan Stanley, Wall Street financial titans seem to firmly believe that even during a period of "global chaos" caused by the unprecedented tariff policies implemented by Trump triggering a global "trade war," US stocks will always stand firm as a typical measure of their enormous achievements during their tenure.

The so-called 'Trump Administration scoreboard,' for Wall Street and even a portion of American voters, is the s&p 500 index. Trump regards the US stocks as an achievement, which is the greatest expectation of the bullish forces on Wall Street. Wall Street strategists generally believe that even though the Trump 2.0 era may bring about high deficits, re-inflation, a new round of global trade wars, and even a global economic downturn, the next US president will at least not let his economic plan damage the resilience of the US economy and the US stock market.

"Trump believes that the stock market performance is the most important component of his performance evaluation." Eric Stein, Chief Investment Officer of Apollo Wealth Management, said, "During his first term, he often started his speeches as president with 'how is your 401K retirement fund?', when the market was at historic highs. Therefore, he obviously did not want to enact any economic policies that could threaten the current bull market."

"Outside the US, stocks of healthcare, clean energy, and luxury goods companies that do not have equivalent counterparts in the US seem to be very attractive investments. In non-US developed markets, we see significant investment opportunities in large dividend-paying companies with sustainable investment return rates, strong cash flow generation ability, good capital discipline records, and a history of consistent payouts." Alexis de Tocqueville, head of international developed market stocks at Goldman Sachs' Asset Management department, stated.

"Due to strong corporate earnings growth, valuation remains reasonable, although emerging market stocks face negative expectations from Trump's tariffs, large companies focusing on the domestic market may also bring significant investment opportunities. Asian stock markets are showing clear differentiation, with Japan and India's stock markets still having strong upward fundamentals." Said Ashish Shah, Chief Investment Officer of Public Investments at Goldman Sachs Asset Management.

"In other regions, such as the stock markets of China Taiwan and South Korea, semiconductor companies critical to the development of artificial intelligence may outperform the local benchmark indices. The Japanese stock market is driven by strong profits, enhanced corporate governance measures, and changes in the inflation environment, but also faces some unfavorable factors such as an overly hawkish Bank of Japan. Countries with favorable demographics like Mexico are also attractive." Shah stated.

In the global markets, Goldman Sachs overall favors the Japanese stock market, expecting it to outperform the European stock market and many other emerging markets. Goldman Sachs forecasts that the benchmark index for the Japanese stock market - the TOPIX index, is expected to rise to 3100 points, with a total return rate of 17% in local currency, currently hovering around 2700; the European STOXX 600 index is expected to rise to 530 points, with a total return rate of about 8% in local currency.

Private Equity and Private Credit

Goldman Sachs believes that the private market is evolving and attracting a broader range of investors seeking to supplement traditional market exposures. "With a stable macro environment and a realignment of investor expectations, 2025 should be a catalyst for a more normalized private equity acquisition environment." Brad Gross, Global Co-Head of Alternative Investments Private Equity at Goldman Sachs, stated. There are indications that this process has already begun, positioning the industry more favorably for exits and new capital deployments, although some areas of the market are more attractive than others.

"In the venture capital and growth equity space, valuations and growth expectations in many areas of the market have normalized, with the subdued financing environment of the past two years resulting in dry powder levels below the record in 2023. These factors have created a more constructive environment for deploying new capital in an asset class that often provides significant opportunities for innovative companies in the highest growth stages. "As venture-backed companies remain private for longer, there is a growing demand for growth equity capital." Goldman Sachs stated.

"Paradoxically, interest rate cuts may have a constructive impact on private credit, alleviating supply-demand imbalances and normalizing spreads levels," added Greg Olafson, Global Head of Alternative Investments Private Credit at Goldman Sachs.

"Overall, there should be a balance between the overall demand for public and private credit, with companies choosing between the lower capital costs available in public markets and the more tailored capital structures and financing solutions provided in private markets." He stated. Overall, there is an expectation for continued growth in the market's interest in private credit, expanding to various areas such as direct originated investment-grade credit and asset financing.

Real estate activity may accelerate.

"Similar to other major asset classes, real estate fundamentals are driven by market cycles. The dynamics observed in the real estate sector are propelled by demographics, the development of the technology industry, and long-term sustainable trends, all of which will continue to shape global real estate demand. The attractiveness of real estate assets reflecting these themes will vary by region and individual asset quality." Goldman Sachs' Global Head of Alternative Investments in Real Estate, Jim Garman, continued.

Sustainable development

Goldman Sachs emphasizes that investors are refocusing on "substantive factors," opting to "revert to fundamentals" and pay more attention to financial returns. By investing in core areas such as carbon emissions that have actual impact, while maximizing financial returns, it is a modern sustainable investment strategy that combines environmental goals and economic interests.

Goldman Sachs' asset management division believes that the continuously expanding investable universe will bring about greater scale of actual impact, linking sustainable development models with stock performance and quantifiable impacts to enhance performance. "The global trend towards decarbonization of the economy will require capital to enter industries with higher emissions - such as cement, chemicals, and steel producers - and substantial progress needs to be made." Goldman Sachs stated.