News Digest:

Economic growth concerns are mounting as major financial institutions lower their 2025 GDP forecasts. Morgan Stanley now expects 1.5% growth, down from 1.9%, while Goldman Sachs revised its outlook from 2.4% to 1.7%. This reflects growing uncertainty about the economy’s trajectory under President Trump’s administration.

Trump and his economic team maintain a long-term view, dismissing short-term market turbulence as a necessary “detox” or “transition.” However, the market’s reaction suggests skepticism. While Trump’s policies prioritize national economic goals over Wall Street’s fluctuations, the stock market’s downward movement implies a lack of confidence in long-term gains.

Initially, deregulation, lower energy prices, and business-friendly tax policies were expected to offset negative effects like tariffs and public-sector job losses. However, financial markets are recognizing that economic shocks may come first, with benefits materializing later—if at all. Yahoo! Finance quotes Economist Mohamed El-Erian’s warning that if growth slows to 1% or below, even optimistic outlooks on global trade fairness may not justify the economic disruptions.

Adding to the uncertainty is inflation. The upcoming Consumer Price Index (CPI) report will reveal the impact of tariffs and trade policies. While investors may tolerate market volatility, the emergence of stagflation—a combination of slow growth and rising inflation—would be far more troubling. If GDP figures align with these worsening forecasts, Trump’s economic vision may prove too ambitious, risking stagnation instead of prosperity.

End Notes

Source: https://finance.yahoo.com/news/the-gdp-warnings-are-adding-up-morning-brief-100046388.html