Not even the higher tariff that the United States (US) plans to impose on Philippine goods would dampen the local equity market, thanks to strong domestic macroeconomic fundamentals, according to global investment banking giant Goldman Sachs.

In a July 11 report obtained by Manila Bulletin, Goldman Sachs Portfolio Strategy Research said the US Federal Reserve’s (Fed) monetary easing cycle is expected to “gather pace” and “reinforce dollar decline.”

“Lower US rates and a softer dollar tend to be supportive for regional equities. South Korea, the Philippines, Taiwan, and Hong Kong are the most positively sensitive to these factors,” the report said.

As for sectors with the most favorable sensitivity to downward US short-term rates plus a weaker greenback, Goldman Sachs noted that “capital goods, chemicals, transportation, healthcare, and property tend to outperform energy, retail, mining, banks, and utilities.”

Specifically for the Philippine stock market, Goldman Sachs said it has “the potential to deliver 15‑percent total US‑dollar returns based on nine‑percent domestically driven earnings growth in 2025 to 2026, three‑percent Philippine peso appreciation, and a three‑percent dividend yield.”

Even though it is harder to buy and sell because it’s “highly illiquid,” the local stock market is currently valued at around 10.5 times next year’s expected profits—about two standard deviations below its 10‑year average, Goldman Sachs said.

Other positive macro factors influencing Goldman Sachs’ outlook include its forecast of Philippine real gross domestic product (GDP) growth at 5.6 percent this year, which is within the government’s downgraded target of 5.5 to 6.5 percent.

Goldman Sachs also noted that “inflation is under control, giving the BSP [Bangko Sentral ng Pilipinas] room to cut [key interest rates by] 50 basis points (bps) in the second half of 2025.”

Also, the Philippines’ sensitivity to risks from higher US tariffs is considered lower compared to most of its regional neighbors, it added.

While US President Donald Trump last week raised to 20 percent—from the 17 percent announced during April’s “Liberation Day”—the levy on Philippine exports to America, it remained below Laos and Myanmar’s 40 percent, Cambodia and Thailand’s 36 percent, Indonesia’s 32 percent, and Malaysia’s 25 percent.

In a separate July 11 report also obtained by Manila Bulletin, Goldman Sachs Economics Research noted that, in general, the US tariff rates to be slapped on Asian countries by Aug. 1 are “mostly similar” to the original reciprocal tariffs declared in April.

In the case of the Philippines, the exposure of its exports’ domestic value added (DVA) to US demand as a share of GDP is among the lowest in Asia-Pacific, joining New Zealand, China, Indonesia, and Australia, Goldman Sachs data showed.