Goldman Sachs – Macro Outlook, 2024

According to Goldman Sachs' macro outlook for 2024, the global economy performed better than expected in 2023, with GDP growth surpassing consensus forecasts. Core inflation has also decreased from 6% in 2022 to 3%, indicating a disinflationary trend. The authors predict further disinflation in the upcoming year, with core inflation expected to fall to 2-2.5% by the end of 2024. The authors believe that the risk of a recession is limited, with a 15% probability of a US recession. They cite several factors that may contribute to global growth in 2024, including strong real household income growth, less tightening of monetary and fiscal policies, a recovery in manufacturing activity, and the willingness of central banks to implement rate cuts if necessary. Most major developed market central banks have likely finished hiking interest rates, with rate cuts not expected until the second half of 2024. The authors also anticipate central banks keeping policy rates above their estimations of long-run sustainable levels. The Bank of Japan is expected to start moving towards exiting yield curve control in spring and raise rates in the second half of 2024 if inflation continues to meet its target. China is predicted to experience short-term growth due to policy stimulus, but a multi-year slowdown is expected to persist. The market outlook is complicated due to compressed risk premia and well-priced markets, but the authors anticipate higher returns in rates, credit, equities, and commodities compared to cash in 2024. They suggest a balanced asset mix and a greater emphasis on duration in portfolios. The transition to a higher interest rate environment has been tumultuous, but the authors believe that fixed income assets will offer better forward returns. The authors expect the US dollar to remain strong, as there is no clear challenger to the US growth story. However, they warn that sovereign stress in Europe could potentially reemerge.