Goldman Sachs The Markets
Growth shocks, not just inflation, to be a primary driver of markets
Mar 1, 2024
Exploring the shift from inflation fears to growth shocks as a market driver, with insights on market sensitivity to data and core inflation expectations. Discussion includes strategies for navigating the transition phase, the impact of upcoming US labor market reports, and the influence of global market trends on investor portfolios.
10:10
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Quick takeaways
- Growth shocks, not inflation, are becoming a primary market volatility driver.
- Balancing equity and bond portfolios is crucial during the current market transition phase.
Deep dives
Transition Period in Markets: Fed Policy and Growth Data Impacting Rates
The recent transition in the stock and bond markets has been influenced by changes in Federal Reserve policy and strong growth data. Initially, there was an overestimation of expected Fed cuts which caused a shift in market sentiment. Subsequent stronger growth news, including positive job reports and GDP growth, led to a more hawkish policy stance from the Federal Committee members. As a result, five-year rates have increased significantly. Although market sensitivity to January data may have led to some overreactions, rates are expected to adjust as Fed cuts become more imminent towards mid-year.
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