Goldman Sachs has predicted that the economy and investing landscape will return to pre-2008 conditions, with a 15% recession probability for the year ahead. Despite concerns about the rocky transition to a higher rate environment, the bank expects various tailwinds to support global growth and investments moving forward. These tailwinds and robust growth suggest that conditions are normalizing as the ultra-low-rate era comes to an end, signifying a significant shift from the low inflation, zero policy rates, and negative real yields that have characterized the post-Great Financial Crisis environment.
Goldman Sachs’ strategists have stated that 2024 should solidify the notion that the global economy has emerged from this post-GFC environment, paving the way for positive real expected returns for investors. The firm also expects non-cash assets to outperform cash in 2024 as a result of declining inflation, growth in real household income, and a bounce-back in manufacturing activity. However, despite their relative optimism, the strategists warned about the higher-than-normal risks associated with 2024, especially the possibility that the Fed and other central banks may keep interest rates high for longer than anticipated.
In addition to the shift to a more normalized investing environment, the bank also pointed to possible downside risks, such as a potential delay in the recovery of global manufacturing if high rates cause companies to normalize inventory levels relative to sales below 2019 levels. Overall, while there are positive prospects for global growth and investments, challenges and uncertainties remain as the economy and investing landscape continue to evolve.
