Wall Street is bracing for a pivotal Federal Reserve meeting in September, and Goldman Sachs is weighing in with a clear call.
Josh Schiffrin, the investment bank’s chief strategy officer for global banking and markets, said five-year US Treasurys remain his “favorite trade” across all asset classes ahead of what he described as an almost certain interest rate cut.
Speaking on Goldman’s The Markets podcast on Friday, Schiffrin said he sees Treasurys in the 3% to 4% yield range as particularly attractive, especially in a climate of growing economic uncertainty.
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“I think of valuations with five-year sector Treasurys in the 3 and 3.25 to 4% zone as attractive,” he said. “I also think they have good characteristics to protect, should there be risk market weakness.”
The five-year yield stood at 3.83% as of Monday morning, down significantly from 4.38% at the start of the year, reflecting investor anticipation of looser policy. Schiffrin argued that short-dated government bonds will provide a shield as markets prepare for both softer economic data and the Fed’s next moves.
Betting on a September Cut
Schiffrin made it clear that he expects the Fed to ease monetary policy next month, citing weakening labor data as a key driver. The US economy added just 73,000 jobs in July, well below forecasts of 106,000, suggesting the labor market is losing steam.
“I kind of feel like it’s 25 basis points in September with a very high likelihood,” Schiffrin said. “Keeping rates unchanged is even less likely than a reduction of 50 basis points.”
His comments align with the broader market consensus. A Reuters survey of 110 economists found that 61% expect the Fed to cut its benchmark rate by a quarter percentage point to between 4% and 4.25% when policymakers meet on September 17. That would mark the first reduction of 2025 after five straight holds.
Fed Balancing Act
Chair Jerome Powell has resisted pressure to cut rates at recent meetings, citing inflation still running above the Fed’s 2% target and the need to assess the impact of earlier hikes. The central bank has kept rates steady through five consecutive meetings, most recently at the end of July.
But investors increasingly believe the Fed’s hand is being forced by cooling job growth and mounting signs of economic slowdown. Meanwhile, consumer and business confidence remains fragile, clouded further by uncertainties surrounding tariffs imposed under President Donald Trump’s trade policy.
Trump’s Pressure Campaign
The White House has been far from quiet in this debate. President Trump has openly and repeatedly called on Powell to lower rates, arguing that high borrowing costs are hurting American competitiveness. For months, Trump has taken to public rallies, social media posts, and interviews to insist that monetary easing is essential for sustaining growth.
While Powell has held his ground so far, citing the need for caution, the political spotlight on the Fed has intensified. If the central bank follows through with a September cut, it could fuel speculation that Trump’s pressure campaign is finally yielding results — even though Fed officials stress their independence.
For Goldman Sachs, the calculus is straightforward: five-year Treasurys offer both value and protection in an environment that seems to be tilting toward looser monetary conditions. Schiffrin’s comments suggest the bank expects not just one cut, but potentially a cycle of easing that could extend into 2026 if growth falters further.
However, for investors, the coming weeks will test whether the Fed bends under political and market pressure or maintains its cautious stance — a decision that could ripple across bonds, equities, and currencies worldwide.