David Kelly, Chief Global Strategist at JPMorgan Asset Management, recently expressed an optimistic view on the U.S. economic outlook, arguing that the current turmoil in the oil market and tariff-related concerns are merely temporary headwinds that are expected to gradually subside in the coming months. Kelly acknowledged that his firm has slightly lowered its second-quarter GDP growth forecast due to lower-than-expected tax refunds and persistent oil price pressures, but emphasized that excessive focus on short-term fluctuations should be avoided. He pointed out that the resumption of oil supply from the Persian Gulf is an inevitable outcome, and that the U.S. will ultimately need to reach an agreement with Iran to restore normal supply order in the global energy market. On the inflation front, Kelly predicts that the year-over-year increase in the Consumer Price Index (CPI) will peak between 3.5% and nearly 4% in June, before significantly retreating. He expects that, driven by falling oil prices, tariff relief, and declining housing costs, the inflation rate is likely to return to the Federal Reserve’s 2% target by the end of the year, and fall further below that level by 2027. Kelly also predicts that the U.S. Congress will pass some form of economic stimulus measure over the summer, potentially including tariff rebate checks, to support the economy before the November election. In the long term, he believes the upper limit of the U.S. economy’s potential growth rate is around 1.5%, and that productivity gains from artificial intelligence (AIEQ) will be needed to offset the impact of a declining working-age population.
In contrast, Jan Hatzius, Chief Economist at Goldman Sachs, pointed out through detailed modeling analysis that the burden of tariffs is by no means a short-term pain, and that the core costs will be directly absorbed by U.S. consumers. Goldman Sachs research data projects that as tariff policies are further implemented, the proportion of costs borne by U.S. consumers could radically surge from around 20% in the initial phase to over 60%. This cost-pass-through mechanism will directly lead to a significant rebound in the core Personal Consumption Expenditures (PCE) price index and could persistently disrupt the disinflation process over the next two to three years, forcing a substantial delay in the Federal Reserve’s timeline for returning to its 2% inflation target. Regarding the actual impact on economic growth, the assessments of the two institutions show a marked divergence. Goldman Sachs adopts a more pessimistic forecast, believing that tariff policies will become a major “headwind” for U.S. economic growth in 2025. According to Goldman Sachs’ latest macro report calculations, tariffs could drag down annual GDP growth by approximately one percentage point, lowering their growth forecast for the year to around 1%. Goldman Sachs experts believe that only when the lagged drag effects of tariffs gradually diminish in 2026, coupled with the implementation of tax cuts, might the economy experience a true stabilization.
This debate over the nature of inflation reflects deep concerns on Wall Street regarding the future direction of monetary policy. According to Goldman Sachs’ prime brokerage data, hedge funds sold global stocks in March at the fastest pace in 13 years, marking the second-largest reduction in holdings since the bank began tracking the data in 2011, driven primarily by an increase in short selling. As a result, the MSCI All-Country World Index fell 7.4% in March, its largest monthly drop since 2022; the S&P 500 Index (SPX) fell 5.1% over the same period. Capital has notably rotated into defensive assets, with fund managers increasing holdings in the consumer staples sector at the fastest pace since July 2025. Additionally, in the technology, media, and telecommunications sectors, hedge funds recorded net buying for the first time in four months, but this change was largely driven by short covering rather than new long positions.
