Josh Schiffrin, Chief Strategy Officer and Head of Financial Risk at Goldman Sachs, shares his expertise on the current economic landscape. He discusses the robust job market and falling inflation rates, which may influence the Federal Reserve's next moves. The conversation also explores how bond yields are responding to policy changes and the stock market's optimistic outlook. Schiffrin offers investment strategies focusing on US stocks, blending insightful financial analysis with a light-hearted take on his favorite basketball team.
The robust labor market with significant job gains indicates strong economic health, suggesting a stable environment for US stocks.
Despite potential inflationary pressures from tariffs, a balanced approach from the new administration may keep inflation manageable in the long term.
Deep dives
Strong Labor Market Signals
The recent payroll report indicates a robust labor market, highlighted by significant job gains and a decreasing unemployment rate. Analysis of the six-month average reveals approximately 175,000 job additions per month, demonstrating a stable rather than overheated labor market. With low jobless claims further supporting this view, the economic strength heading into 2025 appears solid. The combination of these factors suggests that the economy is on strong footing without signs of overheating.
Inflation Outlook and Policy Considerations
Inflation concerns might not be as pressing as some market participants believe, particularly with the incoming administration's focus on cost of living issues. While proposed tariffs could exert upward pressure on prices, they may be counterbalanced by other disinflationary measures that the new administration could implement. This balanced approach could help mitigate the inflationary impact that often arises from tariff policies. Overall, a comprehensive assessment of policy changes suggests that inflation will remain manageable in the coming years.
Market Volatility and Investment Strategies
The stock market is poised for a long-term bullish trend supported by strong economic growth and favorable policies from the upcoming administration. However, after two years of substantial gains, the market is likely to experience increased volatility and corrections throughout 2025. Investors might need to be prepared for choppy conditions, but long-term fundamentals remain strong, suggesting upward momentum in stock prices. Adopting strategies such as favoring short-dated debt maturities and focusing on options for the US dollar could provide protective measures amid market fluctuations.
Inflation is coming down, while the employment picture is surprisingly robust. What does the latest economic data mean for the Fed – and for markets? Josh Schiffrin, chief strategy officer and head of financial risk for Goldman Sachs Global Banking & Markets, discusses with Chris Hussey.