Introduction

Goldman Sachs analysts have identified two significant shifts in global markets that question the established notion of U.S. exceptionalism. In a note published on Monday, the investment bank noted that a sharp re-rating lower of U.S. growth coupled with considerable fiscal stimulus in Germany is altering the balance of economic leadership. U.S. growth expectations have been revised down to 1.7% in 2025 from 2.4% due to tariff volatility and broader policy uncertainties. In contrast, Germany’s increased investment in defense and infrastructure is gaining investor favor.

Key Takeaways

• U.S. Growth Outlook Adjusted:
  Goldman Sachs now predicts U.S. GDP growth of 1.7% in 2025, a decrease from 2.4%, reflecting rising trade policy concerns and tariff-induced uncertainty.
• Fiscal Initiatives in Germany:
  Germany’s robust fiscal proposals, especially in defense and infrastructure, are reshaping investor sentiment and signaling a shift in global economic leadership.
• Declining Support for U.S. Policy:
  The traditional Keynesian-style “policy put” from the U.S. government and the Federal Reserve is diminishing, with officials indicating that a recession cannot be excluded and rate cuts seem unlikely.
• Global Investor Exposure:
  With substantial U.S. assets held by global investors, additional market adjustments might occur unless there’s a notable policy shift.

In-Depth Analysis

U.S. Growth Woes

Goldman Sachs attributes the downward revision of U.S. GDP growth forecasts to persistent tariff volatility and policy uncertainty under the current administration. Markets have already priced in an even sharper slowdown, raising concerns about the risk of a recession without strategic policy intervention.

Germany’s Fiscal Resurgence

In stark contrast, Germany emerges as a fiscal powerhouse, with substantial investments in defense and infrastructure igniting investor interest. Goldman Sachs notes this fiscal impulse strengthens Germany’s growth perspectives and diminishes the likelihood of stagnation, simultaneously attracting interest from global investors.

Investor Sentiment Shift

With global economic risks climbing, particularly within the U.S. and China, Goldman Sachs cautions that investors can no longer depend on a consistent “policy put” from Washington or the Federal Reserve. The decreasing predictability of policy intervention heightens uncertainty across asset classes.

Conclusion

The analysis from Goldman Sachs underscores a vital shift in global economic dynamics, driven by a decline in U.S. growth expectations and a strong fiscal stimulus in Germany. With ongoing uncertainties surrounding U.S. tariff policies negatively impacting traditional confidence in American markets, global investors are gravitating toward European fiscal strength. The upcoming months will prove crucial in determining the future trajectory of global markets.