Headwinds aplenty for the US, but Goldman Sachs shrugs 'em all off. This from multiple sources in the bank. Sluggish growth expected despite recession being avoidedWhile the U.S. economy is not expected to fall into recession, overall growth is likely to remain subdued. Goldman Sachs Chief Economist Jan Hatzius forecasts GDP to expand by just around 1% in 2025, as rising tariff rates weigh on trade and business activity. Meanwhile, core inflation is seen climbing to approximately 3%, with mounting evidence that consumer spending — a key growth driver — is beginning to stagnate.Deficit concerns pressuring long-end yieldsInvestor attention is increasingly turning to the deteriorating U.S. fiscal outlook. Growing concerns over rising deficits are starting to exert upward pressure on long-term Treasury yields. As a result, Goldman Sachs Research expects the U.S. dollar to weaken against a basket of major currencies, as fiscal sustainability questions take centre stage in global markets.Bullish outlook for equities despite yield curve shiftsDespite the uncertain macro backdrop, Ashok Varadhan, co-head of Global Banking & Markets at Goldman Sachs, remains optimistic on U.S. equities. He anticipates the Federal Reserve will lower its policy rate in the coming quarters, causing short-term Treasury yields to fall relative to longer-dated bonds — a development that could support equity valuations and investor sentiment.Deficits and AI spending may lift near-term growth and earningsGoldman Sachs Vice Chairman Rob Kaplan acknowledges that rising deficits could pose longer-term risks to bond markets, particularly at the long end of the curve. However, he notes that the associated fiscal stimulus may help bolster GDP growth in the near term. Coupled with accelerating investment in artificial intelligence, these factors could underpin resilient corporate earnings despite broader economic headwinds. This article was written by Eamonn Sheridan at investinglive.com.