GSWM 2025 Review | [US Preeminence {Part 1}] · [Markets {Fed, Treasury}]

There’s a lot going on right now, with plenty to focus on that’s unrelated to the current or recent market news cycles. When we predict near-term developments and news stories will later prove to be just noise, the challenge lies in dialing back our own noisy contributions to your feeds in order to prepare for the next phase and set of opportunities—at least, that’s the goal.

We took a brief pause to focus on some new technologies we're developing to expand our services and capabilities. Hopefully, markets will remain quiet for the next 3 to 4 weeks.

For now, the Speevr Intelligence updates will continue with a series focused on our semi-annual review of the Goldman Sachs Wealth Management (GSWM) Outlook 2025 report, published in January. This exercise allows us to place the year's developments into a broader context, tying them back to the present and bringing us up to date.

But first, we need to provide some background and share more current information before delving into the report. This helps to better explain why we consistently highlight the GSWM annual report, offering more depth than the superficial criteria typically used in standard research appraisals—a path that ultimately leads us back to the current possibilities and limitations of AI.

Market Update

Sentiment Shift

Before diving into today’s main topic, a quick comment on the current state of the markets. We’ll provide a more detailed macro outlook from our top sources in a follow-up update.

When we last conducted a macro review six to seven weeks ago, market sentiment was heavily skewed toward downside risks. At that time, we felt it was crucial to highlight alternative perspectives that challenged the prevailing narratives. If our stance came across as overly bullish on U.S. equities or broader risk assets, that was neither our intention nor our primary objective.

While our commentary was contrarian, the risks were more balanced back then—only sentiment and positioning were crowded. Markets are also minority games in the short run. That’s all.

Now, based on our latest research and commentary, here’s where we believe market sentiment stands:

By early July, most short or underweight positions had been covered as markets continued their upward momentum.

The prevailing consensus among market professionals is that the U.S. economy remains resilient, supported by strong tech earnings, particularly from the ongoing AI boom. However, there’s usually a “but…” Markets seem to have “run ahead” of their fundamentals, driven by a sharp, technical short squeeze.

The implications for markets are open to interpretation. According to several momentum indicators, the S&P 500 is currently in overbought territory, and has been for several weeks. The list of known downside risks remains unchanged—even as some risks have receded—while the case for an extended rally is less developed.

Recession Probabilities

A key metric that encapsulates the current market state is Wall Street’s 12-month U.S. recession probability estimates, which have fluctuated between 15% and 60% since January, depending on momentary sentiment. Currently, economists with the most influence on the markets peg it at around 25-40%. Further downward revision from 33% to 20% in recession probability could boost sentiment among Wall Street analysts and investors.

Some may argue that markets already reflect normalized recession probabilities. However, when other factors are taken into consideration—particularly with respect to further upside potential in investor sentiment—we would disagree.

In-House 2025 Outlook

Our in-house 2025 outlook, laid out at the start of the year, remains broadly unchanged—albeit with some (to put it mildly) interim market turbulence. We should once again emphasize that our annual market outlooks are an exercise in synthesizing the best research from our partners and open sources to create a macro investment thesis.

As such, our analysis is more of an amalgamated research literature review and should be viewed as secondary to the primary sources we cite. Occasionally, we may commission additional research to fill in gaps or provide further clarification.

For what it's worth, we continue to favor overweight exposure to U.S. equities and assign a higher likelihood of witnessing asset bubbles during a potential second Trump presidency, before any material downside risks emerge. The reasons for this view are covered extensively in previous updates and will be revisited in the upcoming ones.

It’s important to mention that a key defining feature of asset bubbles is the rise of lofty valuations that often diverge from underlying fundamentals. This includes scenarios in which the U.S. economy slows below its potential, yet the stock market continues to rise—without a currency devaluation to justify it.

The “asset bubble investment thesis” is simply a harder strategy to market to prospective clients, or even retain existing ones—it's like trying to sell tornado-chasing vacations. While the thrill and potential rewards are there, the risks and unpredictability make it a tough sell to most, but a niche group, even though everyone loves a good return.

Fed Meeting

Here’s a gifted article by ‘Nick the Greek' providing a summary overview of the FOMC meeting being held today and tomorrow. The WSJ writes:

Two Fed governors, Christopher Waller and Michelle Bowman, have signaled that they could dissent this week, preferring to cut rates right away….

Waller argued that the headline unemployment rate, which edged down in June, is masking weakness in private-sector hiring. It is a different argument from the one Trump is making for rate cuts because it presumes that the economy isn’t actually very strong.

“If you’re talking about [a cut in] September, what are you waiting for? Go ahead and do it now” to avoid allowing the labor market to weaken, Waller said.

Waller has consistently advocated for interest rate cuts throughout 2024 and 2025, citing signs of economic slowdown and near-target inflation.

In May 2025, Waller indicated that rate cuts remained possible later in the year, contingent on tariffs settling at the lower end of expectations and underlying inflation progressing toward the 2% target, citing his comments at the time to Reuters:

“If we can get the tariffs down close to the 10% and then that's all sealed, done and delivered somewhere by July, then we're in good shape for the second half of the year, and then we're in a good position to kind of move with rate cuts through the second half of the year,” Waller said.

The Trump administration managed to seal all the major trade deals by the end of July, but certainly not anywhere near a 10% average tariff rate.

If we get a couple of surprise private-sector payroll prints to the upside, Waller will be firmly placed into the “flimsy” and “desperate” (for the top job) bucket among his peers—unless he's bailed out by a further slowdown in economic activity, and/or disinflation or deflation risks rise.

In short, Governor Waller's recent track record means he starts from a position of weakness when arguing his case to his FOMC peers. A future Fed Chair lacking trust and influence over fellow committee members would be ineffective in fulfilling the president's agenda.

U.S. Treasury Refinancing

U.S. Department of the Treasury released its quarterly borrowing estimates and provided an economic statement to the Treasury Borrowing Advisory Committee (TBAC) with the Quarterly Refunding Statement scheduled for tomorrow (July 30, 2025).

This has triggered market speculation that the Treasury will expand its debt buyback program, particularly for 20- and 30-year bonds, with proceeds from front-loaded issuance.

While we cannot comment on the plausibility of such rumors, financial engineering or repression, asset tokenization, bypassing or undermining the Fed, yield curve controls, and even debt monetization are all within the realm of possibility—or should be expected—from the White House.

It's not so much Trump, but those around him. It's a coalition of a particular type of tech and finance “lizards' brains” we know and understand.