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Goldman Sachs The Markets
Why US stocks could keep rising in 2025
Dec 20, 2024
Ashok Varadhan, Co-Head of Goldman Sachs Global Banking & Markets, dives into the recent fluctuations in US stocks driven by the Fed's rate-cutting forecasts. He discusses whether the market's downturn is an overreaction and emphasizes the resilience of leading companies amid changing economic indicators. Varadhan explores potential growth in US capital markets by 2025, highlighting challenges and opportunities in private markets, investment strategies in emerging markets, and how fiscal support and normalized interest rates could reshape the landscape.
09:48
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Quick takeaways
- The Federal Reserve's cautious approach to rate cuts reflects a balance between managing inflation and promoting economic growth, impacting future stock market dynamics.
- Despite high valuations, U.S. equity markets show potential for growth driven by strong earnings, stock buybacks, and a favorable business environment, highlighting U.S. exceptionalism.
Deep dives
Federal Reserve Actions and Market Reactions
The recent cuts by the Federal Reserve and the slow pace of rate adjustments reflect a cautious approach to economic data. Initially, expectations varied with market speculations leaning towards more aggressive rate cuts, yet the Fed opted for a more measured strategy, introducing a total of two projected cuts for the upcoming year. This approach is influenced by economic growth, which is anticipated to exceed 2.5%, coupled with a significant reduction in inflation, although it has yet to reach the 2% target. The overall sentiment indicates that while market volatility has increased, the Fed aims to balance economic growth and inflation control moving forward.
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Discover
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