The experts at Goldman Sachs have published their outlook for 2024. This is how inflation, the key interest rate and the stock market are expected to develop in 2024.
• Goldman Sachs expects further disinflation in 2024
• First interest rate cuts probably in the second half of 2024
• S&P 500 is expected to gain five percent in 2024
After a difficult 2022, the market predominantly showed its friendly side in 2023. But what will happen next in 2024? In November 2023, Goldman Sachs published its outlook for 2024.
GDP growth and disinflation
The global economy has exceeded even the most optimistic expectations for 2023, as Goldman Sachs explains. And the US bank also has some promising predictions for 2024. For 2024, for example, global GDP growth of 2.6 percent is forecast. Meanwhile, core inflation in economies that have seen prices rise post-COVID will fall from 6 percent in 2022 to 3 percent the following year, the U.S. bank said in the report titled “Macro Outlook 2024: The Hard Part Is Over.” explained. And disinflation is expected to continue in 2024. Even though normalization on the product and labor markets has now made significant progress, the disinflationary effect has not yet fully developed. According to Goldman Sachs’ forecast, core inflation is expected to decline to 2 to 2.5 percent by the end of 2024.
Risk of recession and interest rate cuts
According to the experts, the probability of a recession is also limited, which is why the recession probability of 15 percent for the USA has been confirmed. “We expect several tailwinds for global growth in 2024, including strong growth in real household incomes, a reduced burden from monetary and fiscal tightening, a recovery in manufacturing and a greater willingness of central banks to cut interest rates if growth slows,” it said Goldman Sachs. Most major central banks in developed countries have probably already completed their interest rate hikes. According to the US bank’s baseline forecast for a robust global economy, interest rate cuts are unlikely to occur until the second half of 2024. Experts expect central banks to keep policy rates above current estimated long-term sustainable levels when interest rates are ultimately set.
Macroeconomic environment
The Bank of Japan is expected to begin relinquishing control of the yield curve in the spring before formally exiting and raising interest rates in the second half of 2024, explains Goldman Sachs. However, this assumes that inflation remains on track to meet the target of 2 percent. Meanwhile, short-term growth in China is likely to benefit from further policy stimulus, but the multi-year slowdown in China is expected to continue.
The market outlook would be complicated by low risk premiums and well-valued markets under the main scenario. Experts expect returns on bonds, loans, stocks and commodities to exceed cash returns in 2024. Each of these instruments offers protection against different risks, so balanced asset allocation should replace the focus on cash in 2023, with duration playing a more important role in portfolios.
While the transition to a higher interest rate environment has been bumpy, investors could now hope for significantly better returns on fixed income investments. The key question is whether a return to interest rates before the global financial crisis represents equilibrium. The answer is likely to be more positive in the US than elsewhere, particularly in Europe, where the sovereign debt crisis could flare up again. Without a clear challenger to the US growth story, US Bank experts estimate that the dollar will likely remain strong.
S&P 500 is expected to grow by five percent in 2024
In another outlook entitled “2024 US Equity Outlook: ‘All You Had To Do Was Stay'”, the US bank explains that it would expect the S&P 500 to grow by five percent in 2024. “Our macroeconomic forecasts point to a positive outcome for stocks, but the current starting point will limit the potential appreciation of the US stock index in 2024,” David Kostin, chief US equity strategist at Goldman Sachs Research, explains in the report.
Analysts expect the S&P 500 index’s gains to be concentrated in the second half of 2024. Kostin writes: “Strong economic growth at the beginning of the year will cause the market to revise its current valuation downwards, leading to Fed rate cuts in the second quarter. Uncertainty surrounding the US elections will dampen risk appetite. Later in the year This year, the Fed’s first interest rate cuts and the clarification of the election situation will cause US stock prices to rise.”
Tech stocks
A defining feature of the stock market in 2023 has been the massively superior performance of a small group of mega-tech stocks. Analysts predict these stocks will continue to outperform the entire index in 2024. The top seven tech stocks feature faster revenue expectations, higher margins, a larger reinvestment ratio, and more robust balance sheets compared to the other 493 stocks. “The top seven stocks will give you slightly better returns, but not nearly the dramatic difference we saw this year,” Kostin said in an interview during a Nov. 16 media roundtable. He also points out that the risk-reward ratio for mega-cap tech stocks is not particularly attractive because expectations are already high. Hedge fund participation in these companies is already higher than usual and there is potential for a “shift” in AI enthusiasm among investors. While generative AI could potentially lead to greater growth in corporate profits, in most cases AI is expected to have a limited impact on profitability in 2024.
“Quality” stocks
Although Goldman Sachs Research expects below-average returns for U.S. stocks in 2024, analysts believe there are more attractive investment opportunities beneath the surface. “Quality” stocks characterized by higher profitability, more robust balance sheets, and stable sales and earnings growth could outperform in an environment where investors remain concerned about a possible recession. Analysts believe that growth stocks with a higher expected growth rate than the rest of the market could be attractive in an environment of stable economic growth and stable interest rates. Cyclically lagged stocks, which are typically sensitive to economic downturns, could rally as economists see the risk of recession as lower than feared.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
Selected leverage products on Goldman Sachs
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the leverage you want and we will show you suitable open-end products on Goldman Sachs
The leverage must be between 2 and 20
Advertising