Goldman Sachs has identified the Japanese yen as the top currency hedge against risks stemming from a potential U.S. recession and President Donald Trump's tariff policies. The bank expects the yen to strengthen to the low 140s against the U.S. dollar in 2025, citing its historical performance during periods of falling U.S. equities and real yields. Hedge funds remain net short on the yen, while Japanese bond yields are at decade highs. Goldman strategists revised their U.S. economic outlook to include three Federal Reserve rate cuts this year, reflecting concerns over the economic drag from the tariffs. The tariffs, announced on April 2, are expected to weigh on U.S. growth and global trade. In Europe, Goldman Sachs downgraded its 12-month forecast for the STOXX Europe 600 Index to 570 from 580, citing the impact of U.S. tariffs. The bank also lowered earnings growth projections for European companies in 2025 and 2026 but noted that fiscal spending on defense and infrastructure could mitigate some of the negative effects. Additionally, Goldman raised its FTSE 100 forecast to 9100 and cut its S&P 500 target, reflecting broader concerns over the tariffs' impact.