Goldman Sachs and Morgan Stanley's Assessment of the Dollar, Yuan, and Stock Markets

Goldman Sachs (GS) and Morgan Stanley (MS) predict that the Chinese yuan will be weaker against the U.S. dollar by the end of 2025, while the dollar is expected to maintain its strong performance for some time. Meanwhile, positive expectations are emerging for the Japanese equity market and U.S. stock market, especially with anticipated activity in merger and acquisition activities.

According to Goldman Sachs and Morgan Stanley, the yuan will weaken by the end of 2025. Analysts at Goldman Sachs expect the yuan to decline to 7.5 against the U.S. dollar, while analysts at Morgan Stanley predict this level will be 7.6. These forecasts indicate that the yuan will weaken further from its current level of 7.2371 against the dollar.

Goldman Sachs anticipates ongoing strength in the dollar. The firm forecasts a new strong period for the dollar, spurred by the effects of former U.S. President Donald Trump’s plans to increase tariffs. The bank notes that since September, the dollar has experienced a rise. The strategy team led by Kamakshya Trivedi at Goldman expressed the view that the dollar will remain strong, contrary to earlier expectations of declines.

Goldman Sachs Chairman David Solomon predicts an increase in mergers and acquisitions in 2025 alongside the new administration in the U.S. Solomon also indicates that he expects activity in capital increases. Given the current situation, he expresses that there is a recovery in stock and merger activities.

Goldman Sachs has revised its outlook for the Japanese equity market positively. The bank's Japan portfolio strategy team stated that risks are skewed to the upside following the U.S. presidential election. The three-member team noted that macroeconomic momentum will strengthen in Japan and structural reforms will balance uncertainties. The bank has raised its target prices for the Topix index and revised its targets for three different periods.

Morgan Stanley has increased its S&P 500 target for the end of 2025. The bank's strategists set a price target of 6,500 for the S&P 500 in their baseline scenario. Expectations for the Fed to cut interest rates in 2025 and improvements in business cycle indicators suggest that U.S. companies will continue to see profitability. The firm's strategist, Michael Wilson, shared these views in a note published on Monday.