Goldman Sachs The Markets
Can the US rally get back on track?
Sep 13, 2024
Tony Pasquariello, Global Head of Hedge Fund Coverage at Goldman Sachs, teams up with research analyst Chris Hussey to dissect the current state of U.S. equity markets. They explore how rising volatility, Federal Reserve rate cuts, and job growth are shaping investor sentiment. The duo provides insights on AI's evolving role in market confidence and the impact of GLP1 treatments. They also discuss how political factors and economic forecasts play into market optimism amidst precautionary caution over high valuations.
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Quick takeaways
- Uncertainty in equity markets is fueled by expectations of Federal Reserve rate cuts and a significant decline in job growth.
- Investor sentiment is shifting towards skepticism about the AI narrative, emphasizing the need for tangible evidence of productivity gains.
Deep dives
Impact of Fed Rate Cuts on Market Sentiment
Anticipations surrounding the Federal Reserve's potential rate cuts are creating a sense of uncertainty in the equity markets. Currently, expectations suggest approximately 200 basis points of cuts leading up to 2026, reflecting concerns over a slowdown in growth. Notably, job growth has significantly declined from an average of around 270,000 in the first quarter to only 116,000 jobs in recent months, indicating that cyclical market sectors are anxious about the implications of this trend. This volatility is compounded by the upcoming U.S. elections and mixed predictions regarding whether the Fed will enact a 25 or 50 basis point cut, complicating market stability and investor confidence.
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