Goldman Sachs has aggressively cut its 12-month U.S. recession probability down to 15% (from its prior forecast of 25%).

The revision by chief economist Jan Hatzius signals a return to the bank’s long-term baseline norm, sparked by the dramatic easing of global energy and supply chain anxieties following the temporary U.S.-Iran oil agreement.

1. The Macro Rationale: Erasing the Energy Tax

The fundamental catalyst behind the revision is the sudden removal of a massive economic headwind. On the eve of the West Asian maritime standoffs, Goldman had pushed recession odds higher to reflect the severe growth drag of a closed Strait of Hormuz and sky-high oil prices.

With General License X temporarily legalizing Iranian crude sales and reopening traditional shipping lanes, Goldman expects an outright decline in seasonally adjusted U.S. consumer prices in June as pump prices plunge. This drop function acts as an immediate, sequential boost to real household income.

2. Nudging Up H2 GDP Targets

Alongside the slashed recession odds, Goldman nudged its second-half U.S. GDP growth forecast up to 2%. The updated economic framework relies on two primary pillars of insulation:

                               ┌──► Lower pump prices inject raw purchasing power back to consumers
[Goldman U.S. Soft Landing] ───┤
                               └──► AI boom drives strong corporate CapEx and historic equity wealth

While Hatzius cautioned that broader real consumer spending growth will remain somewhat moderate (~1.5%) as early-year tax refund tailwinds fade, the underlying economy continues to show structural resilience.

3. The Federal Reserve Matrix

The economic upgrade lands amid a shifting guard at the central bank, following a hawkish-leaning Federal Open Market Committee (FOMC) meeting helmed by new Fed Chair Kevin Warsh.

Despite some policymakers quietly signaling a bias toward interest rate hikes to combat lingering structural inflation, Goldman is maintaining its baseline forecast of no Fed rate hikes for the remainder of the year. The bank’s research notes that roughly half of the members pushing the hawkish narrative are currently non-voting Federal Reserve Bank presidents, meaning the bar for an actual policy tightening remains high given the cooling core inflation print (projected to average just 0.17% over the next three months).

The Structural Watchpoint: While Goldman is highly optimistic about a soft landing for the broader economy, it issued a distinct warning to tech investors. The note flagged that AI-related stock valuations have scaled so aggressively that they are “now high even relative to our optimistic views” regarding the long-term value AI will create over the next decade, warning clients that further massive near-term equity gains are becoming increasingly difficult to fundamentally justify.