(7/06/26)

Goldman Sachs made one of the week's most significant macro calls, pushing its forecast for the first Federal Reserve rate cut into June 2027, having previously expected easing to begin in late 2026. The change follows stronger-than-expected employment data and continued economic resilience.

The bank believes the economy remains strong enough for policymakers to tolerate elevated rates for longer. Goldman also argued that current market enthusiasm is elevated but far from bubble territory. Its internal analysis showed overall market exuberance at 66%, well below the peaks of 99% during 2000 and 92% during 2021.

For bankers, a higher-for-longer environment supports strategic M&A but continues to challenge leveraged buyouts and highly debt-dependent transactions.

Market implications

• Fed cuts may be delayed until 2027

• Economic growth remains stronger than expected

• Equity markets are elevated but not yet euphoric

M&A / deal flow implications

• Strategic M&A remains attractive

• LBO financing conditions remain challenging

• Corporate balance sheets retain an advantage over sponsors

3 key takeaways

1. Goldman now expects no Fed cuts until 2027

2. Economic data remains surprisingly resilient

3. Market exuberance is elevated but not extreme