Goldman Sachs The Markets “Long stocks, short bonds”
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May 9, 2025 
Anshul Sehgal, Global Co-Head of Fixed Income, Currency and Commodities at Goldman Sachs, dives into market dynamics and investment strategies. He shares insights on the repercussions of tariffs, such as the lumber trade with Canada, and whether they truly benefit the economy. The discussion also covers the Fed's cautious approach to inflation and stagflation, the effects of U.S. exceptionalism amid foreign capital outflows, and strategic decisions around long stocks and short bonds in a changing fiscal landscape.
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Tariffs Create Economic Uncertainty
- Tariffs are an inflationary shock causing uncertainty over their economic impact path.
- Reversing trade imbalances risks weakening U.S. growth, which carries a high cost.
Fed Adopts Wait-and-See on Tariffs
- The Fed is hesitant to act on tariffs-induced stagflation, preferring to wait for clarity.
- Labor market weakness would likely prompt Fed rate cuts even amid inflation pressures.
U.S. Wealth Growth Outpaces Foreigners
- U.S. households' wealth has grown four times more than foreigners despite deficits due to domestic investment.
- This wealth creation makes reversing trade deficits without growth sacrifices unattractive.