Every time we get a new administration—or even the threat of one—there’s a wave of handwringing over what it means for the economy and the markets.
Everyone starts asking a variation of the same question: Should I bail on U.S. equities, rethink long-term allocations, or hedge for doomsday?
So, when Goldman Sachs recently published their US Economy and Key Investment Themes in the Context of the Rapid-Fire Policies of the Current Administration, I dug into it. It’s loaded with perspective—and reassurance.
Here’s the “too long, didn’t read” bottom line: Goldman’s Investment Strategy Group (ISG) isn’t flinching, and neither am I.
Goldman’s ISG stance?
“The actions of the new administration—and recent underperformance of US equities— [do not] undermine our long- standing US Preeminence theme.”
Let’s be clear—Economic policy uncertainty is near its highest levels in history. According to the report, it’s in the 99th percentile and since Inauguration Day. U.S. equities are down 8%, Tariffs are back in vogue, immigration policy is tightening, and the federal government is in the administration’s crosshairs.
Sound familiar?
I’m not taking up on one side of the aisle and I don’t think you should, either…that’s why this report does a great job at putting all of this into historical context.
- Tariffs? We’ve been here before—from the Embargo Act of 1807 to the trade spats under multiple presidents.
- Immigration crackdowns? Not new.
- Attempts to roll back the federal government? Ronald Reagan campaigned on it in 1980. In fact, even the current push to shut down the Department of Education echoes Reagan’s 1982 budget plan.
In other words, today’s headlines are loud—but not unprecedented.
What I liked most about the report is how grounded it is in structural realities rather than short-term noise. Goldman reiterates the same theme I’ve been hammering for years – the U.S. has deep, long-term advantages that one administration, no matter how unconventional, liked, or hated can’t erase.
In fact, here’s a blog quote from a decade ago (March 2015) that was all about patience:
“The hardest part of being an investor is to look at the long run and stick to a plan.”
(Fun fact: The Dow was trading around 18,000 when I wrote that.)
Fast-forward to today
The U.S. is still the largest economy in the world. In 2024, GDP hit $29.2 trillion—almost 60% larger than China’s. We’re also the wealthiest large nation, with nominal GDP per capita at $86,600—nearly triple that of Germany. And we’ve still got the most productive workforce on the planet.
Those numbers aren’t just bragging rights—they translate into the ability to outspend other countries on R&D, innovation, defense, and education. And that’s the bedrock of our economic resilience.
Yes, There Are Frictions
Goldman’s report does acknowledge the real risks.
- Tariffs are rising faster than expected. Their base case assumes a 12.5% effective tariff rate, up from just 2.5% before Trump 2.0. That’s not trivial.
- They’ve shaved 0.3% off their 2025 GDP growth forecast and now expect 2% for the year.
- Core inflation is projected to end 2025 at 3.1%, up from the prior 2.2% estimate. Still, that’s not panic territory.
- Recession risk? They peg it at 20%—higher than normal, sure, but not flashing red.
One ISG quote stood out to me:
“Despite this downgrade, we still place only 20% odds on a recession over the next 12 months and continue to recommend clients stay invested in US equities.”
Uncertainty ≠ Exit Sign
Here’s a stat that might surprise you – according to Goldman’s data, after spikes in economic policy uncertainty, the S&P 500 has posted average one-year gains of over 20%. In 8 out of 10 of those episodes, returns were positive.
To reinforce that, I went back to a blog from April 2017 titled Predictably Unpredictable (back when my beloved Men’s Gamecock basketball team was in the Final Four and the Lady Gamecocks won the NCAA tournament) and found this quote:
“Notwithstanding [the]risks, we believe the long-term outlook for stocks remains positive.”
I went on to address what to focus on for the long term and outlined lots of different risks – political, military, international relations…
The Dow then? 20,500
Uncertainty may rattle nerves—but remember it also resets expectations and creates opportunity.
Goldman even points out that periods of 1–3% GDP growth (where we are now) have historically led to positive S&P 500 returns 90% of the time.
My Takeaway?
It’s cliché, but here it is: Stay the course.
If you’re long U.S. equities, now’s not the time to rethink your thesis. We’re not in a boom, but we’re not in a bust either. The biggest risk is not the headlines—it’s overreacting to them.
Here’s something I say often, and I mean it – it’s never the end of the world when you think it’s the end of the world.
- Think back to the tech wreck from 2000 to 2002.
- Or the financial crisis in 2008.
- Or even the COVID crash in 2020, when the market dropped over 30% in a matter of weeks and the world literally shut down.
Each time, it felt existential. But each time, the market recovered—and not just recovered but went on to reach new highs.
The investors who weren’t forced to sell during those downturns—who didn’t panic, who stayed disciplined—were the ones who participated in the recovery.
That’s the whole point. Don’t overreact. Don’t let emotion dictate your portfolio. The real strategy is making sure you have enough cash on hand to live out of, so you don’t have to sell anything during corrections, bear markets, or moments of chaos.
That’s what smart financial planning is for. Your investments can’t recover if you’ve liquidated them under duress.
So yeah, we’ve got noise. But the fundamentals are intact. The structure is intact. And frankly, the market has weathered worse.
Keep looking forward,
Source – Goldman Sachs Investment Strategy Group, US Economy and Key Investment Themes in the Context of the Rapid-Fire Policies of the Current Administration, March 2025. Reach out if you want to see this.
