Goldmam Sachs – Global Markets Outlook, 2024

Goldman Sachs has recently released its Global Markets Outlook for 2024, focusing on 10 core investment themes that drive their market views. The report highlights several key points. Firstly, the inflation rate is nearing its target, and although there is no immediate risk of a recession in the US, the markets have already priced for a soft landing. Secondly, the yields on core assets have returned to pre-financial crisis levels, offering a more conventional opportunity set. The report also suggests that further disinflation could open the door for a weak "Fed put" later in 2024. Additionally, while most places have a benign growth backdrop, the US appears to be the "surest thing" in terms of growth over inflation. Higher rates may cause ongoing stress for some sovereigns and pockets of corporate and consumer sectors, which poses challenges to them. With better valuations and a shift from inflation to growth risks, duration becomes more attractive for portfolios. However, carry, the return earned from holding an asset, is less appealing than all-in yield, limiting the potential upside, even in benign cases. The report also touches on the valuation of equities, noting that valuations are not evenly stretched, and there is potential upside if rates fall earlier. The limits of narrow outperformance in emerging markets are also discussed, with selective performance reaching its limits and requiring relief from US rates for broader gains. Finally, the report recommends balancing portfolios, as non-cash assets are expected to outperform cash, and each asset class offers protection against different "tail" risks.