Goldman Sachs warns of a 30% correction risk for U.S. stocks in 2025? Trump's policies and inflation are key drivers!

In Las Vegas, there is a saying: "Everyone loves a gambler until they lose." If you've ever witnessed a crowd cheering around a hot-handed gambler, you will understand the meaning of this phrase. However, good luck always comes to an end, and the stock market is no different. According to the Zhitong Finance APP, analysts at Goldman Sachs have been closely monitoring stock market dynamics, believing that the current market is overheated and may face a correction of up to 30% in the future.

Like all investment institutions, Goldman Sachs' analyst team is dedicated to analyzing stock market data, attempting to predict potential downturns that could cause significant losses for Goldman Sachs and its clients. While an overheated market inherently carries the risk of a substantial correction, Goldman Sachs has also identified another potential threat: the uncertainty surrounding the economic policies of the incoming Trump administration. Data from Goldman Sachs shows that risk levels have surged sharply since September 2024. The key risk indicators they track include:

• Overall economic growth in the United States;

• Inflation (which may rise again, hindering the Federal Reserve's ability to cut interest rates);

• The direction of U.S. economic policy;

• The rising valuation of stocks across the market (stock prices).

Andrea Ferrario, a member of the Goldman Sachs analyst team, pointed out, "Market variables contribute most significantly to the upward momentum of inflation. Over the past few months, commodity prices and the U.S. breakeven inflation rate have been steadily climbing." Goldman Sachs' report also emphasizes that the tariff policies of the Trump administration will become the "center" of increasing global trade uncertainty and have a profound impact on the market.

Additionally, the uncertainty of European economic policies has also increased the risk of significant adjustments in the market. Like the Federal Reserve, the European Central Bank is also attempting to curb inflation in 2024 by managing interest rates. Goldman Sachs states that uncertainty in the European region is at a "historical high," leading to a decline in European stock market valuations.

Ferrario further emphasized this threat: "Although the predictive ability of policy uncertainty for stock market declines is inconsistent, the rising policy uncertainty and geopolitical risks make the likelihood of stock market declines elusive." Since 1950, Goldman Sachs has been tracking the risks of global stock market declines. Currently, the risk coefficient is approaching 30%, enough to sound internal alarms.

In the history of Goldman Sachs tracking decline risks, the largest corrections and adjustments have occurred when the risk coefficient exceeded 35%. Although the current risk rating has not yet reached this level, it is gradually approaching a dangerous zone. For example, if Trump's tariff policies lead to final prices of consumer goods exceeding what consumers can afford, then publicly traded companies producing and selling these goods may face significant profit losses, thereby exerting substantial downward pressure on the stock market. The technology sector faces particularly pronounced risks in this scenario.

In 2024, the Nasdaq and S&P 500 indices surged significantly, driven by strong performances from tech stocks like NVIDIA (NVDA.US), but NVIDIA is not alone. Due to strong demand for artificial intelligence in data center real estate and high-performance chips or semiconductors, stocks across multiple industries have benefited However, if tariffs lead to price increases for these products, the stock prices of the "seven giants" and popular Nasdaq stocks could be severely affected. It is well known that many institutional investors, retail investors, and large funds have heavily invested in technology stocks. These investments have indeed yielded substantial returns in 2024, but if the proposed tariffs cause significant damage to the technology and consumer goods sectors, a sharp decline in stock prices is not out of the question