Normalization of Fed's reaction function and volatility to impact portfolios

Goldman Sachs Investment Officer believes that the Fed's policy has peaked, signaling a more balanced approach to growth and inflation. Anticipating rate cuts starting in the middle of the year, they push back on the market's expectation of rate cuts in Q1. The economic backdrop is expected to benefit both stocks and bonds, but an increase in volatility is also projected. Key drivers of volatility include global elections, concerns about fiscal deficit and government spending, and geopolitical tensions. While US equity markets are acknowledged to be expensive, high valuations are supported by strong fundamentals and historical data indicating strong performance in election years.