8 November 2023 | 11:01AM EST

Global Economics Analyst

Macro Outlook 2024: The Hard Part Is Over

n The global economy has outperformed even our optimistic expectations in 2023. Jan Hatzius
+1(212)902-0394 | [email protected]
GDP growth is on track to beat consensus forecasts from a year ago by 1pp Goldman Sachs & Co. LLC

globally and 2pp in the US, while core inflation is down from 6% in 2022 to 3% Dominic Wilson
+1(212)902-5924 |
sequentially across economies that saw a post-covid price surge. [email protected]
Goldman Sachs & Co. LLC

n More disinflation is in store over the next year. Although the normalization in Joseph Briggs
+1(212)902-2163 |
product and labor markets is now well advanced, its full disinflationary effect is [email protected]
Goldman Sachs & Co. LLC
still playing out, and core inflation should fall back to 2-2½% by end-2024.
Vickie Chang
+1(212)902-6915 | [email protected]
n We continue to see only limited recession risk and reaffirm our 15% US Goldman Sachs & Co. LLC
recession probability. We expect several tailwinds to global growth in 2024, Devesh Kodnani
+1(917)343-9216 |
including strong real household income growth, a smaller drag from monetary [email protected]
Goldman Sachs & Co. LLC
and fiscal tightening, a recovery in manufacturing activity, and an increased
Giovanni Pierdomenico
willingness of central banks to deliver insurance cuts if growth slows. +44(20)7051-6807 |
[email protected]
n Most major DM central banks are likely finished hiking, but under our baseline Goldman Sachs International

内部纪要，勿传播，公众号：有道调研
forecast for a strong global economy, rate cuts probably won’t arrive until
2024H2. When rates ultimately do settle, we expect central banks to leave
policy rates above their current estimates of long-run sustainable levels.
n The Bank of Japan will likely start moving to exit yield curve control in the spring
before formally exiting and raising rates in 2024H2, assuming inflation remains
on track to exceed its 2% target. Near-term growth in China should benefit from
further policy stimulus, but China’s multi-year slowdown will likely continue.
n The market outlook is complicated by compressed risk premia and markets that
are quite well priced for our central case. We expect returns in rates, credit,
equities, and commodities to exceed cash in 2024 under our baseline forecast.
Each offers protection against a different tail risk, so a balanced asset mix should
replace 2023’s cash focus, with a greater role for duration in portfolios.
n The transition to a higher interest rate environment has been bumpy, but
investors now face the prospect of much better forward returns on fixed income
assets. The big question is whether a return to the pre-GFC rate backdrop is an
equilibrium. The answer is more likely to be yes in the US than elsewhere,
especially in Europe where sovereign stress might reemerge. Without a clear
challenger to the US growth story, the dollar is likely to remain strong.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
Goldman Sachs Global Economics Analyst

Macro Outlook 2024: The Hard Part Is Over

The global economy has outperformed even our optimistic expectations in 2023. As
Exhibit 1 shows, we now estimate that global GDP will grow 2.7% this year, 1pp above
the Bloomberg consensus forecast of a year ago. The United States is on track for
growth of 2.4%, a full 2pp above the consensus forecast of a year ago. The surprises
elsewhere are generally smaller, but we do expect beats in 88% of the economies
under our coverage on a GDP-weighted basis.

Exhibit 1: Growth Has Outperformed Our Optimistic Expectations in 2023

内部纪要，勿传播，公众号：有道调研

Source: Bloomberg, Goldman Sachs Global Investment Research

Solid GDP growth has translated into more-than-solid labor market performance. Exhibit
2 shows that the unemployment rate across all economies under our coverage that
produce high-quality labor market data continued to edge down in 2022-2023 and now
stands about ½pp below its pre-pandemic level. Importantly, this improvement is visible
even in some key economies that have seen very low real GDP growth, such as the
Euro area.

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Goldman Sachs Global Economics Analyst

Exhibit 2: Unemployment Has Settled Below Pre-Pandemic Levels

Source: Haver Analytics, Goldman Sachs Global Investment Research

These positive surprises came despite several unexpected negative shocks. First, both
short-term and long-term interest rates rose significantly further than implied by market
pricing—partly due to better-than-expected growth data but also partly due to more
hawkish central bank reaction functions, at least early in the year. Second, there was a
brief but serious bout of banking sector instability in the US and Europe during the

内部纪要，勿传播，公众号：有道调研
spring. And third, the Israel-Hamas war is a sobering reminder of the growing security
risks facing the world order, although so far it has not had a major impact on oil prices,
financial markets, or the real economy outside the Middle East.

But in an important way, even these observations still understate the amount of good
news that 2023 has delivered. Not only have growth and employment surprised to the
upside in the face of several negative shocks, but all this has occurred alongside much
lower inflation across all economies that saw a large and unwanted post-pandemic price
surge in 2021-2022.

To demonstrate the size of the improvement, Exhibit 3 plots the average core CPI
inflation rate of all G10 economies minus Japan (where higher inflation was desired) plus
the EM “early hiker” economies that experienced the biggest inflation surges and thus
delivered the most aggressive monetary policy tightening. Since the end of 2022,
sequential core inflation in this group of economies has fallen from 6% to 3%
sequentially. Central banks have therefore achieved more than three-quarters of the
adjustment needed to get inflation back to their targets.

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nZ9UuZnUnVpWtUaQdN9PoMnNnPmPfQnMqRjMpPvMaQoPpRuOoOnNMYrQqP
Goldman Sachs Global Economics Analyst

Exhibit 3: A Sharp Drop in Core Inflation Across the Economies That Saw a Post-Pandemic Surge

Source: Haver Analytics, Goldman Sachs Global Investment Research

The improvement is widespread across economies. Exhibit 4 shows that every

economy in our group of G10 and EM economies has seen a very meaningful—and in
most cases dramatic—inflation decline from the peak.

Exhibit 4: Core Inflation Has Declined Very Meaningfully Everywhere

内部纪要，勿传播，公众号：有道调研

Source: Haver Analytics, Goldman Sachs Global Investment Research

The improvement is also broad across price index components. Exhibit 5 shows that
the right tail of the distribution of price changes (which captures big price increases) has
shifted partway back toward its pre-pandemic position, although it has not fully
normalized because of “catch-up” moves in lagging areas where prices are set relatively
infrequently (e.g., healthcare and insurance). By contrast, the left tail of the distribution
(outright price declines) has remained stable throughout this episode. This means that
the drop in prices of items such as energy or US used cars over the past year is the

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Goldman Sachs Global Economics Analyst

exception, and that a re-anchoring of low and stable inflation in more regular
expenditures such as restaurant meals or household products is the more dominant
reason for the improvement.

Exhibit 5: Inflation Is Falling Because the Right Tail of Price Increases Is Normalizing

Source: Haver Analytics, Goldman Sachs Global Investment Research

内部纪要，勿传播，公众号：有道调研

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Goldman Sachs Global Economics Analyst

The Last Mile

We don’t think the last mile of disinflation will be particularly hard. First, although the
improvement in the supply-demand balance in the goods sector—measured for example
by supplier delivery lags—is now largely complete, the impact on core goods disinflation
is still unfolding and will likely continue through most of 2024 (Exhibit 6).

Exhibit 6: Goods Disinflation Still Has Further to Run

Source: Haver Analytics, Goldman Sachs Global Investment Research

内部纪要，勿传播，公众号：有道调研
Second, shelter inflation has considerably further to fall. This is true across DM
economies, although the size of the impact is smaller in the Euro area and the UK
where owner-occupied housing is excluded from the key inflation measures (Exhibit 7).

Exhibit 7: Shelter Cost Inflation Has Further to Fall

Source: Haver Analytics, Goldman Sachs Global Investment Research

Third, and most importantly, the supply-demand balance in the labor market continues
to improve, as shown in Exhibit 8. The left chart shows that our jobs-workers gap—

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Goldman Sachs Global Economics Analyst

measured as job openings minus unemployed workers—is trending down everywhere.

In theory, this improvement could occur in a benign way via a decline in job openings or
in a more pernicious way via an increase in unemployment. In practice, the adjustment
has so far occurred almost entirely in a benign fashion, as job openings have declined
without a rise in unemployment—or in more technical parlance, the “Beveridge curve”
has shifted back most of the way to its pre-pandemic position, as shown in the right
chart. We expect incremental rebalancing to remain mostly painless, as job opening
rates remain elevated relative to levels implied by economic fundamentals (and thus
have room to normalize further) in most major economies, and a full reversal to
pre-pandemic levels is probably not required given that inflation undershot central bank
targets during that period.

Exhibit 8: The Labor Market Is Easing as Job Openings Fall Without Higher Unemployment

内部纪要，勿传播，公众号：有道调研

Source: Haver Analytics, Goldman Sachs Global Investment Research

In light of this improvement and the sharp decline in headline inflation, it is not
surprising that nominal wage growth has started to slow meaningfully back toward
target-consistent levels (Exhibit 9). Together with generally anchored inflation
expectations, this suggests that significant second-round effects from the earlier
inflation surge are unlikely.

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Goldman Sachs Global Economics Analyst

Exhibit 9: Sequential Wage Growth Is Slowing Everywhere

Source: Haver Analytics, Goldman Sachs Global Investment Research

The upshot from this discussion is that last year’s disinflation does indeed have further
to run. On average across the G10 ex. Japan and the EM early hikers, we expect a
slowdown in sequential core inflation from 3% now to the 2-2½% range that would be
broadly consistent with the inflation targets of most DM central banks by the end of
2024 (Exhibit 10). If anything, we think that the risks to the achievement of

内部纪要，勿传播，公众号：有道调研
target-consistent inflation are on the earlier side.

Exhibit 10: Core Inflation Should Cool to Broadly Target-Consistent Levels by End-2024
GS Core Inflation Forecasts
Percent, year ago Major DMs Percent, year ago Percent, year ago Aggregate of G10 ex. Japan Percent, year ago
and EM Early Hikers*
7 7 7 7
US (PCE)
Euro Area
6 6 6 6
UK
Canada
5 Australia 5 5 5

4 4 4 4

3 3 3 3

2 2 2 2

1 1 1 1

0 0 0 0
2019 2020 2021 2022 2023 2024 2025 2026 2019 2020 2021 2022 2023 2024 2025 2026
Note: Dashed lines indicate GS forecasts. *We show early hikers with standing core inflation forecasts, including the Czech Republic,
Hungary, Mexico, Poland, and Romania. Dashed lines indicate GS forecasts.

Source: Haver Analytics, Goldman Sachs Global Investment Research

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Goldman Sachs Global Economics Analyst

There’s Just No Need for a Recession

Despite the good news on growth and inflation in 2023, concerns about a recession
among forecasters haven’t declined much. Even in the US, which has outperformed so
clearly on growth in the past year, Exhibit 11 shows that the median forecaster still
estimates a probability of around 50% that a recession will start in the next 12 months.1
This is down only modestly from the 65% probability seen in late 2022 and far above
our own probability of 15% (which in turn is down from 35% in late 2022).

Exhibit 11: We Have Become More Confident That the US Economy Will Avoid Recession

Percent US 12-Month Ahead Recession Probability Percent

100 GS Bloomberg Consensus 100
April 2022: September 2023:
Launched GS Lowered to 15% on
Tracking at 15% March 2023:
Continued Positive
80 Raised to 35%
Labor Market and 80
October 2022: on Banking
Inflation News
Raised to 35% Stress
on Hawkish Fed
60 June 2022:
June 2023: 60
February 2023: Lowered to 25%
Raised to 30% July 2023:
Lowered to 25% on Receding
x Debt
on Higher Loweredxto
on Labor Market Limit and Banking
40 Inflation 20% on 40
Adjustment Risks
Disinflation
Progress

20 20

0 0
Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23

内部纪要，勿传播，公众号：有道调研
Source: Bloomberg, Goldman Sachs Global Investment Research

More broadly, we expect another year of growth outperformance across most of the
economies we cover. We forecast 2.6% global growth in 2024 on an annual average
basis, a touch above our estimate of global potential growth (Exhibit 12). Most notably,
our forecasts call for US growth to again outpace its DM peers, with country-level
forecasts implying 1.1pp outperformance (vs. consensus) in the US, 0.5pp in Japan,
0.5pp in Canada, 0.3pp in China, 0.3pp in Australia, and 0.2pp in the Euro area.

1
The latest estimate that the US economy will enter a recession as defined by the Business Cycle Dating
Committee of the National Bureau of Economic Research in the next 12 months is 55% in the Bloomberg
survey shown in the chart and 48% in the latest Wall Street Journal survey.

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Exhibit 12: We Forecast Above-Consensus GDP Growth in 2024

Real GDP Growth Annual Average Q4/Q4
2023.. 2024.. 2025.. 2024 Potential
Percent Change yoy
GS Consensus GS Consensus GS Consensus GS GS
US 2.4 2.3 2.1 1.0 1.9 1.8 1.8 1.8
Euro Area 0.5 0.5 0.9 0.7 1.5 1.5 1.3 1.1
Germany -0.1 -0.4 0.6 0.5 1.3 1.5 1.0 1.3
France 0.9 0.8 1.1 0.8 1.3 1.4 1.3 1.1
Italy 0.7 0.7 0.7 0.6 1.2 1.2 1.2 0.8
Spain 2.4 2.3 1.7 1.4 1.7 2.0 1.8 1.3
Japan 1.9 1.9 1.5 1.0 1.1 1.0 1.3 0.9
UK 0.5 0.4 0.5 0.4 1.0 1.3 0.8 1.4
Canada 1.3 1.1 1.1 0.6 1.7 2.0 1.4 1.8
Australia 2.0 1.8 1.8 1.5 2.4 2.2 2.0 2.6
China 5.3 5.2 4.8 4.5 4.2 4.5 4.6 4.2
India 6.4 6.5 6.3 6.1 6.5 6.4 5.7 6.1
Brazil 3.1 3.0 1.6 1.6 2.4 2.0 2.5 2.1
Russia 2.4 2.0 2.1 1.3 1.3 1.2 0.9 2.0
World 2.7 2.5 2.6 2.1 2.7 2.7 2.6 2.5
Note: All forecasts calculated on calendar year basis except when otherwise stated. IMF forecasts used for India 2025 consensus when quarters not
available in Bloomberg. The global growth aggregates use market FX country weights.

Source: Bloomberg, Goldman Sachs Global Investment Research

There are four main reasons for our optimism on growth.

The first reason is our constructive outlook for real disposable income growth in an
environment of much lower headline inflation and still-strong labor markets. Although
we expect US real income growth to slow from the outsized 4% pace seen in 2023 to
2¾% in 2024, this should still be sufficient to support consumption and GDP growth of
at least 2%. Meanwhile, both the Euro area and the UK should see a meaningful
内部纪要，勿传播，公众号：有道调研
acceleration in real income growth—to around 2% by end-2024—as the Russian gas
shock fades (Exhibit 13).

Exhibit 13: Continued Real Income Strength in the US and a Pickup in Europe

Source: Haver Analytics, Goldman Sachs Global Investment Research

The second reason is that while monetary and fiscal policy will likely weigh on growth
across the G10, the biggest drag is behind us. As we have shown repeatedly, the
maximum impact of monetary tightening on the growth rate (as opposed to level) of

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GDP occurs with a short and reasonably predictable lag of about two quarters. We
therefore expect a smaller drag from tighter financial conditions in 2024 than in 2023,
even after factoring in the recent increase in long-term interest rates.

We estimate that fiscal policy will subtract 0.2pp from global growth in 2024, with only a
slightly larger 0.3pp drag in DMs. The drag is likely to be small in the US because most
pandemic-related stimulus has already ended and fiscal consolidation is unlikely to start
in a presidential election year. It should be larger in the UK (where an election also
looms but the energy crisis support will nevertheless roll off) and in Southern Europe
(which will likely see the end of energy-related payments and a pullback in EU Recovery
Fund spending). Our combined monetary and fiscal impulse estimate is set to fade
despite modest fiscal headwinds, however, and points to a maximum pain point in late
2022 (Exhibit 14).

Exhibit 14: A Manageable Drag from Monetary and Fiscal Policy

内部纪要，勿传播，公众号：有道调研

Source: Goldman Sachs Global Investment Research

The third reason is that manufacturing activity should recover somewhat in 2024 from a
subdued 2023 pace. Weak industrial activity this year reflected a combination of
unusual headwinds, including a rebalancing of spending back towards services from
goods, the European energy crisis, an inventory destocking cycle that corrected for an
overbuild in 2022, and a weaker-than-expected rebound in Chinese manufacturing.
Most of these headwinds are set to fade this year, as spending patterns normalize,
gas-intensive European production finds a trough, and inventories-to-GDP ratios
stabilize, prompting a manufacturing recovery back towards trend from below (Exhibit
15).

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Goldman Sachs Global Economics Analyst

Exhibit 15: Gas-Intensive European Manufacturing Is Finding a Trough and Inventories Are Edging Back to Normal Levels

Source: Haver Analytics, Goldman Sachs Global Investment Research

The final and most novel reason for optimism on growth is that because central banks
don’t need a recession to bring inflation down, they will try hard to avoid one. Several of
the EM early hikers—including Brazil and Poland—have already begun to cut policy rates
from highly restrictive levels and are likely to deliver ongoing steady cuts. We see less
scope for preemptive easing in DM economies, but think DM central banks would lose
内部纪要，勿传播，公众号：有道调研
little time before pivoting to cuts if the growth outlook deteriorated meaningfully.
Indeed, our analysis of past hiking cycles confirms that major central banks are twice as
likely to cut rates in response to downside growth risks once inflation has normalized to
sub-3% rates relative to when inflation is above 5% (Exhibit 16). This is an important
insurance policy against a recession.

Exhibit 16: Central Banks Are More Willing to Pursue Insurance Cuts as Inflation Cools

Percentage points Percentage points

Effect of 1pp Unemployment Rate Increase on
70 Probability of Rate Cut in Following Quarter, 70
By Rate of Inflation
60 60

50 50

40 40

30 30

20 20

10 10

0 0
<3% 3-4% 4-5% >5%
Year-Over-Year Inflation Rate (Percent)

Source: Goldman Sachs Global Investment Research

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Goldman Sachs Global Economics Analyst

A Higher Policy Rate Regime

Although we see a lower hurdle for rate cuts in 2024 and some EM central banks are
already preemptively easing policy, our baseline economic forecasts call for inflation to
remain modestly above target, unemployment rates to remain below their long-run
levels, and GDP to grow at a roughly trend pace in 2024. So although we forecast that
major DM central banks (aside from Japan) are finished hiking, our baseline forecast
implies little incentive for them to cut interest rates in the near term, and we do not
expect DM rate cuts until 2024H2 barring a weaker-than-expected growth outcome.

Across DM central banks, we expect the ECB, BoE, and BoC to start cutting on the
earlier side, probably in 2024Q3 but possibly even earlier. This is because of the
expected inflation progress in the Euro area and a weaker growth outlook in the UK, and
because of a reaction function that puts more weight on the level of the policy rate
relative to neutral in Canada. By contrast, we anticipate that growth outperformance in
the US will lessen the urgency to lower rates and delay the first rate cut until 2024Q4,
while firm inflation should keep Australia on hold until 2024Q4 as well. With inflation
still modestly above official targets, central banks are likely to proceed cautiously after
initiating their rate-cutting cycles, and in all cases we forecast only a gradual
normalization at a 25bp per quarter pace (Exhibit 17).

Exhibit 17: Cuts Are Coming Sooner (in EM) or Later (in DM)

内部纪要，勿传播，公众号：有道调研

Source: Haver Analytics, Goldman Sachs Global Investment Research

When policy rates ultimately do settle, we expect central banks to leave them above the
long-run sustainable levels they currently project. We are raising our long-run policy rate
forecasts by 50bp in major DMs to 3.5-3.75% in the US, 2.5% in the Euro area, 3% in
the UK, and 3.5% in both Canada and Australia, with similar upgrades in other
economies.

The most important driver of this forecast change is our longstanding view that the
neutral rate is a poorly identified concept, and that changes in financial conditions are
more useful in determining the appropriate stance of policy. As labor markets

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Goldman Sachs Global Economics Analyst

rebalance, growth is around potential, and inflation normalizes back to target, many
central banks will see the argument for further easing as relatively weak, especially
when coming from above. And if economies do prove resilient with policy rates at
elevated levels, some central banks could reevaluate their estimates of longer-run rates
and conclude that, in retrospect, the downgrades during the post-2008 cycle were
excessive.

Several economic fundamentals also argue for higher longer-run rates going forward.
First, global government deficits are likely to remain elevated despite incremental fiscal
consolidation. Second, higher investment this cycle—whether to facilitate the transition
to “net zero” or the widespread adoption of generative AI—could also put upward
pressure on near-term equilibrium interest rates. Finally, the productivity boosts
promised by generative AI—which recently prompted us to upgrade our longer-run
growth forecasts by 0.4pp in the US, 0.3pp in other DMs, and 0.2pp in advanced EMs—
could put upward pressure on rates, especially if the generative AI adoption timeline is
more frontloaded (Exhibit 18).

Exhibit 18: Elevated Deficits and the Widespread Adoption of Generative AI Should Support Higher Long-Term Rates

内部纪要，勿传播，公众号：有道调研

Source: Goldman Sachs Global Investment Research

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Goldman Sachs Global Economics Analyst

The Bank of Japan Exits

Among DM economies, Japan stands apart because the inflation pickup was largely
desired. After three decades of anemic price pressures or outright deflation, the strong
2023 shunto wage round signaled that the BoJ was moving towards its goal of
establishing a virtuous cycle between wages and prices. Healing global supply chains
imply that some moderation in Japanese inflation—which by all measures is currently
above 2%—is likely in the pipeline, but underlying services inflation is likely to remain
firm against a stronger labor market backdrop (Exhibit 19, left panel).

The BoJ is therefore poised to start moving toward an exit from yield curve control in
April 2024, beginning with a pivot to a tightening bias and a further increase in the
10-year reference rate following a likely even stronger spring shunto (Exhibit 19, right
panel). A formal abandonment of the policy is unlikely until October, once services
inflation data has credibly validated that an established wage-price linkage is likely to
keep inflation near target for the foreseeable future. Even so, Japanese inflation should
remain far below what its G10 peers have experienced this cycle, and we therefore
expect only a modest pace of rate hikes (with the deposit rate reaching just 0.25% by
the end of 2025).

Exhibit 19: Japanese Inflation May Fall Back to the Target, But the BoJ’s Eyes Are on the Shunto
Percent, year ago Japan CPI Inflation Percent, year ago Percent, year ago Shunto Base Pay Raise Percent, year ago

6 6 3.0 3.0
Headline
5 5 2024 (GS Forecast): 2.5%
New Core*
2.5 2.5
4 Western Core**
Core Services***
内部纪要，勿传播，公众号：有道调研 4

3 3 2.0 2.0
BoJ Inflation Target
2 2
1.5 1.5
1 1

0 0 1.0 1.0

-1 -1
GS Forecast 0.5 0.5
-2 -2

-3 -3 0.0 0.0
2019 2020 2021 2022 2023 2024 2025 2026 1992 1997 2002 2007 2012 2017 2022
*CPI ex. fresh food and energy. **CPI ex. food and energy. ***Services CPI ex.
rent and dining.

Source: Haver Analytics, Goldman Sachs Global Investment Research

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Goldman Sachs Global Economics Analyst

Temporary Relief From China’s Multi-Year Slowdown

China’s reopening rebound in 2023 proved somewhat disappointing (although 2023
growth is set to outperform both our and consensus forecasts from last fall), and its
multi-year property slowdown has continued to bite in 2023. Still, growth in China has
picked up modestly in recent months and should benefit from further policy stimulus in
the near term. We expect China’s GDP growth to slow to 4.8% in 2024 as the easy
gains from reopening fade into rear view, but supported by a slightly smaller housing
drag, a modest rebound in global trade, and additional policy easing that should be
frontloaded in H1 (Exhibit 20).

Exhibit 20: Growth in China Should Slow as Reopening Runs Its Course, Despite a Boost from Policy Easing
Percent, Contributions to China Percent, Percentage points, China: Effect of Financial Percentage points,
year ago Real GDP Growth year ago annual rate Conditions on Real GDP Growth annual rate
6 6 1.5 1.5
5.3%
5 +0.7pp 4.8% 5 1.0 1.0

+0.4pp 0.5 0.5

4 +0.4pp 4
0.0 0.0
3 -2.0pp 3
-0.5 -0.5
2 2
-1.0 -1.0

1 1 -1.5 -1.5

0 0 -2.0 -2.0
2023 No Covid Smaller Net Increased 2024 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4
(Forecast) Rebound
内部纪要，勿传播，公众号：有道调研
Property
Drag
Export
Rebound
Policy
Support
(Forecast)
2021 2022 2023 2024

Source: Goldman Sachs Global Investment Research

While our 2024 growth forecast is slightly above consensus, we continue to see a
challenging longer-run growth outlook for several reasons. First, the property downturn
is likely to endure, and there is still a risk that the resulting pessimism becomes
entrenched in self-fulfilling expectations. Second, China’s ongoing demographic
deterioration will require the country to reinvent its growth model with a persistently
shrinking working-age population. Third, a modest cyclical rebound in exports is unlikely
to reverse the ongoing diversification of global value chains away from China and toward
some of its peers. We expect China’s trend rate of growth to continue to slow, reaching
just 3% within a decade—less than half the pre-covid norm (Exhibit 21).

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Exhibit 21: An Ailing Property Sector and a Long Slide for Trend Growth in China
Millions of China Monthly Housing Activity Data Millions of Percent, China Real GDP Growth Forecasts Percent,
square feet square feet year ago year ago
New Starts New Sales GS
250 250 8 8
IMF
Bloomberg Consensus
7 7
200 200
2015-2019 Average: 6.7%

6 6
150 150

5 5

100 100
4 4

50 50
3 3

0 0 2 2
2001 2004 2007 2010 2013 2016 2019 2022 22 23 24 25 26 27 28 29 30 31 32 33 34

Source: Haver Analytics, Bloomberg, IMF, Goldman Sachs Global Investment Research

内部纪要，勿传播，公众号：有道调研

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Goldman Sachs Global Economics Analyst

Elevated Uncertainty
Despite our broadly optimistic baseline expectations for 2024, data volatility remains
elevated, and we continue to see higher-than-normal risks to our overall economic
outlook.

Most importantly, risks around our policy rate forecasts are clearly skewed to the
downside. While it is certainly possible that some central banks hike again in the next
few months if inflation surprises to the upside, the convincing and continued progress
on inflation limits the risk that central banks move much further into restrictive territory.
At the same time, the hurdle for rate cuts will likely decline as inflation continues to fall
back toward target levels, suggesting that—particularly at longer horizons—risks around
our policy rate forecasts are asymmetrically skewed toward lower rates. As Exhibit 22
shows for the case of the Fed, this means that a probability-weighted version of our
policy rate forecast is well below our modal baseline forecast.

Exhibit 22: Our Probability-Weighted Fed Funds Forecast is Below Our Modal Baseline Forecast
Percent Fed Funds Rate Scenario Analysis Percent Percent Fed Funds Rate Percent
7 for Next Two Years 7 7 7
Higher for Longer / No Cuts (20%) GS Baseline Path
GS Baseline / Gradual Cuts (35%) GS Probability-Weighted Average Path
Growth Scare / Insurance Cuts (20%) Market Pricing
Recession / Faster Cuts (25%)*
6 6 6 6

5 5 5 5

4
内部纪要，勿传播，公众号：有道调研 4 4 4

3 3 3 3

2 2 2 2
Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25 Jan-23 Jul-23 Jan-24 Jul-24 Jan-25 Jul-25
*This is the probability of a recession occurring at any point over the next two years. Our 12-month recession probability is 15%.

Source: Goldman Sachs, Goldman Sachs Global Investment Research

We also see downside risks around our growth outlook. The first stems from the
continued downside surprises to global manufacturing business surveys. This raises the
possibility that the improvement in manufacturing activity that we anticipate could be
delayed, particularly if higher interest rates lead companies to normalize inventory levels
(relative to sales) below 2019 levels, or if the still-elevated level of goods demand
(particularly in the US) reverts towards its long-run trend more than we anticipate.

The second downside risk stems from geopolitical concerns. In particular, an escalation
of the war in the Middle East that interrupts trade through the Strait of Hormuz could
lead to more significant increases in oil and gas prices that would likely lower global
growth, on net.

8 November 2023 18
Goldman Sachs Global Economics Analyst

Good Macro, Tougher Valuations

These baseline forecasts for near-trend growth and cooling inflation represent a
supportive macro backdrop for asset markets, although the skew of risks—particularly
around rates—has implications for our markets outlook.

The main challenge to our benign baseline economic forecast is that valuations on many
risk assets are richer than normal. In particular, the “carry” or “yield pickup” in credit,
EM, and parts of the equity market is well below where it has been for significant parts
of the recovery. Since April, pricing for most cyclical assets has also shifted toward our
baseline forecasts, despite some rise in risk premium in the last three months. So,
although our economic growth forecasts are well above consensus, the gap to market
pricing generally seems smaller.

For credit and EM rates, tight spreads limit the potential outperformance versus risk-free
rates, while for equities, valuation constraints remain in focus. US equity valuations do
look richer than normal, with discounts in areas with more earnings risk. But even here,
valuation concerns are narrower than sometimes presented. For mega-cap tech,
valuations do not yet look “bubbly” if expected growth profiles are delivered. And
outside US mega-caps, valuations look less stretched versus history—and in many areas
have improved relative to last year—while the Equity Risk Premium is generally
consistent with earlier periods of higher rates (Exhibit 23).

Exhibit 23: Aside From Tech, Absolute Equity Valuations Do Not Look Particularly Elevated

内部纪要，勿传播，公众号：有道调研
Ratio
20
12-Month Forward Price-to-Earnings Multiples Ratio
20
Interquartile Range Median Current
18.5
18 18
Error bars indicate 10th-90th percentiles
16 16.0 16
15.5

14 14.3 14
12.4
12 11.7 12
11.3 11.1
10 10.0 10

8 8
US US ex- World Japan Asia Europe EM Europe UK
Big Tech Pacific ex-
ex-Japan Granolas
Note: Interquartile ranges and median are calculated from 2003-2023. GRANOLAS refers to 11 European stocks: GSK,
Roche Holding, ASML, Nestlé, Novartis, Novo Nordisk, L'Oréal, LVMH, AstraZeneca, SAP, and Sanofi.

Source: FactSet, Goldman Sachs Global Investment Research

By contrast, government bond valuations have clearly improved. In part, this simply
reflects the substantial rise in real yields. But we had seen the pricing of longer-dated
forward yields as vulnerable to continued non-recessionary growth of the kind we have
been forecasting, and after the recent sell-off, those anomalies are much smaller. The
challenge to higher returns is therefore that the market is still pricing rate cuts that we
think will not be delivered under our baseline forecasts. US rate volatility is more
obviously too high, and is likely to fall in our central case, creating a tailwind for
mortgage-backed securities, where spreads remain elevated.

8 November 2023 19
Goldman Sachs Global Economics Analyst

Balancing those valuation constraints against our macro view, we envisage positive
returns in the mid-single to low-double digits for bonds, credit, and equities for the first
time in several years. We expect the combination of supply constraints and steady
demand growth to push prices of key commodities higher in 2024, with carry adding
further to returns. But outside the risk of sharper supply disruptions, deeper upside to
oil prices may be limited by potential supply responses from Saudi Arabia and US shale.

内部纪要，勿传播，公众号：有道调研

8 November 2023 20
Goldman Sachs Global Economics Analyst

Better Real Returns After the “Great Escape”

2024 should cement the notion that the global economy has escaped the post-GFC
environment of low inflation, zero policy rates and negative real yields. The period since
the GFC has often felt like an inexorable move towards lower global yields and low
inflation—“liquidity trap” and “secular stagnation” were the decade’s buzzwords. For all
the handwringing about post-covid policy excesses and the reemergence of inflation,
that policy response has allowed asset markets to escape. Policy rates are firmly
positive in most places, real yields have moved to pre-GFC levels along the curve, and
deflationary risks seem remote.

The transition has been bumpy, but the upside of this “Great Escape” is that the
investing environment now looks more normal than it has at any point since the pre-GFC
era, and real expected returns now look firmly positive (Exhibit 24). Last year, we
highlighted the “return of yield” as the key theme in our markets outlook. With risk-free
rates rising further in nominal and real terms, the yield outlook is one that investors
could only dream of for most of the period since 2008. Constructing portfolios to earn
these higher yields with the right mix of exposures to tail risks remains a central pillar of
our investment outlook.

Exhibit 24: Real “Yields” on Core Assets Are Close to 2005-2007 Averages

内部纪要，勿传播，公众号：有道调研

Source: Shiller (2000), Haver Analytics, Goldman Sachs Global Investment Research

Although the return on cash remains high, we see other asset classes outperforming (at
least modestly) in 2024 (Exhibit 25). If investors are willing to add risk in periods where
markets doubt our baseline soft-landing forecasts, they may be able to add to those
returns. Each asset class offers protection against at least one key tail risk: bonds should
perform more strongly if recession risks rise; stronger global growth and risks of
geopolitical disruptions pose upside to oil prices; and equities could outperform if central
banks cut rates sooner than expected. While front-end yields still look attractive, we
think this profile means that a more balanced asset exposure should probably replace
the focus on cash that dominated in 2023, including a greater role for duration in
portfolios. For investors assigning a higher probability to a recession and rate cuts, a

8 November 2023 21
Goldman Sachs Global Economics Analyst

firmer skew toward duration—and away from risky assets—would make sense.

Exhibit 25: We Expect Higher Returns on Non-Cash Assets Than Cash in 2024

Source: Bloomberg, Datastream, Bloomberg-Barclays, ICE-BAML, iBoxx, Goldman Sachs Global Investment Research

A more constructive view on the value of duration in portfolios is a new element for our
outlook. In part, this simply reflects higher running yields, which provide investors with a
larger cushion. But it also reflects the likely skew of returns. The value of bonds as a
recession hedge should rise in a world where central banks cut interest rates to offset
内部纪要，勿传播，公众号：有道调研
downside growth risk, especially as inflation falls further. Longer-dated yields above the
cash rate would make the case for adding duration simpler, so the market may need to
reach that point, particularly if worries about fiscal sustainability require a larger
premium than we expect. But we think there is already a greater role for longer-dated
bonds in portfolios heading into 2024, or, given the risk of steeper curves, for levered
positions in shorter maturities.

8 November 2023 22
Goldman Sachs Global Economics Analyst

Surviving Higher Rates: More Worries Outside of the US

The big question is whether this return to the pre-GFC yield backdrop proves persistent.
For the US, we have more confidence that longer-run rates will ultimately settle higher
than the Fed expected last cycle (Exhibit 26). A period of “higher for longer” yields may
expose areas of vulnerability in the US—whether it is the access to finance for smaller
companies, continued pressure on some credit provision by small banks, or subdued
mortgage, housing, and commercial real estate activity—although we do not expect
these to threaten the overall economic outlook. The public debt profile is also
increasingly of concern, but we think markets will remain patient unless next year’s US
elections bring the possibility of fresh unfunded fiscal expansion.

Exhibit 26: US Forward Real Rates Have Shifted Back to Pre-GFC Levels

内部纪要，勿传播，公众号：有道调研

Source: Gurkaynak, Sack, and Wright (2006), Haver Analytics, Goldman Sachs Global Investment Research

Resilience in the US looks surer than in some other economies, however. Japan is
unique in being the place where we expect policy rate hikes to begin rather than end in
2024, and, like the US, may escape to an earlier era. In other places, the risks seem
larger. While we forecast a better Euro area growth profile in 2024, the recent macro
underperformance could signal larger scarring effects from the shock to energy supply,
more exposure to the growth slowdown in China, or a more persistent drag from tighter
financial conditions. The impact of higher nominal rates on Italy’s debt sustainability is
another medium-term risk we worry about if global rates remain high.

For China, the balancing act between structural headwinds and near-term stimulus is
more of the same, not an escape from recent challenges. Given prevailing negativity
about China’s growth, local assets could make some gains if growth surprises to the
upside, but a sustained recovery probably depends on a larger shift in policy direction.

Higher yields and continued US dollar strength are also complicating the policy
trade-offs in China and Japan. The longer US yields remain under upward pressure, the
harder it will be for Japanese policymakers to resist yen weakness unless they are
prepared to contemplate more aggressive tightening of monetary policy. And in China,
the more US yields rise and the dollar strengthens, the harder it becomes for Chinese

8 November 2023 23
Goldman Sachs Global Economics Analyst

policymakers to justify resisting a weaker currency. Many of these concerns are well
reflected in markets, but these tensions could grow if US rates push higher.

The bottom line is that although we expect a broad range of DM and EM economies to
avoid recession in the coming year, the case for US growth outperformance looks
stronger. While market pricing probably embeds a more optimistic growth view than the
consensus forecast, we think the fact that our US GDP growth forecasts lie further
above consensus than in Europe and China still carries real information. Alongside our
expectation of broad-based declines in inflation, this backdrop weakens the case for
material US dollar weakness—just as in 2023—even though the end of the Fed rate
cycle and a benign global growth picture tend to weigh on the dollar. Without material
upside surprises in other major economies, it is hard to have much confidence in
extended dollar weakening, and we therefore view risks as skewed toward continued
dollar strength.

Beyond the growth challenges from higher rates and ongoing geopolitical risks, the
biggest reason that a shift toward more balanced allocations may prove premature is the
obvious one: the prospect that better growth, stickier inflation, and weaker fiscal
positions lead to continued upward pressure on yields and downward pressure on
valuations. We think those concerns are likely to remain a feature of the near-term
outlook, at least until inflation eases enough to settle them.

内部纪要，勿传播，公众号：有道调研

8 November 2023 24
Goldman Sachs Global Economics Analyst

Appendix
GS Market Forecasts: Positive Returns on Equities, Credit, and Bonds; USD Stays Strong
Current GS Forecasts Forward pricing Upside vs. forward pricing
Level 3m 6m 12m 3m 6m 12m 3m 6m 12m
Equities
S&P 500 4378 4500 4500 4700 4426 4472 4564 2% 1% 3%
STOXX Europe 600 443 450 460 480 446 444 447 1% 4% 7%
Topix 2333 2500 2600 2650 2329 2304 2281 7% 13% 16%
MSCI AC Asia-Pac ex Japan 494 515 525 550 499 503 507 3% 4% 8%
MSCI EM 961 1050 969 976 989 6%

10 Year Government Bond Yields

US 4.57% 4.75% 4.71% 4.58% 4.58% 4.57% 4.57% 17 bps 14 bps 1 bps
Germany 2.66% 2.69% 2.56% 2.31% 2.65% 2.64% 2.63% 4 bps -8 bps -32 bps
Japan 0.88% 1.06% 1.19% 1.30% 0.95% 1.00% 1.10% 11 bps 19 bps 20 bps
UK 4.27% 4.32% 4.18% 4.06% 4.29% 4.27% 4.30% 3 bps -9 bps -24 bps

2 Year Government Bond Yields

US 4.92% 5.00% 4.96% 4.72% 4.74% 4.58% 4.35% 26 bps 38 bps 37 bps
Germany 2.98% 3.06% 2.94% 2.55% 2.80% 2.60% 2.29% 26 bps 34 bps 26 bps
Japan 0.13% 0.10% 0.12% 0.22% 0.19% 0.24% 0.32% -9 bps -12 bps -10 bps
UK 4.63% 4.62% 4.38% 3.90% 4.42% 4.23% 4.12% 20 bps 14 bps -22 bps

Corporate Bond Spreads (bps, upside vs. spot)

Bloomberg Barclays US IG 125 120 118 115 -5 -7 -10
Bloomberg Barclays US HY 398 383 378 370 -15 -20 -28
iBoxx EUR IG 169 165 162 159 -4 -7 -10
BAML EUR HY 461 458 454 450 -3 -7 -11
JP Morgan EMBI Div. 430 410 -20

Commodities
WTI Crude Oil ($/bbl) 77.4 84.0 88.0 89.0 76.8 76.0 73.8 9% 16% 21%
Brent Crude Oil ($/bbl)
LME Copper ($/mt)
内部纪要，勿传播，公众号：有道调研
81.6
8,112
88.0
8,400
92.0
8,850
93.0
10,000
81.0
8,189
80.1
8,258
78.1
8,391
9%
3%
15%
7%
19%
19%
Iron Ore 62% Fe ($/mt) 125 130 120 120 115 8% 4%
COMEX Gold ($/troy) 1,974 2,050 2,050 2,050 1,987 2,017 2,071 3% 2% -1%
TTF Natural Gas (EUR/MWh) 46.6 45 44 54 48.0 46.3 50.4 -6% -5% 7%

FX (upside vs. USD)

EUR/USD 1.07 1.04 1.06 1.10 1.07 1.08 1.09 -3% -2% 1%
USD/JPY 150 155 155 150 148 146 142 -4% -6% -5%
GBP/USD 1.23 1.18 1.20 1.25 1.23 1.23 1.23 -4% -3% 1%
AUD/USD 0.64 0.62 0.64 0.66 0.65 0.65 0.65 -4% -1% 2%
USD/CHF 0.90 0.92 0.90 0.85 0.89 0.88 0.87 -3% -2% 1%
USD/MXN 17.5 17.0 17.0 17.3 17.7 18.0 18.6 4% 6% 8%
USD/BRL 4.87 4.80 4.70 4.60 4.92 4.96 5.06 2% 6% 10%
USD/INR 83.2 84.0 83.0 82.0 83.5 83.9 84.6 -1% 1% 3%
USD/CNY 7.26 7.30 7.30 7.15 7.18 7.17 7.09 -2% -2% -1%

Source: Bloomberg, Datastream, Bloomberg-Barclays, ICE-BAML, iBoxx, Goldman Sachs, Goldman Sachs Global Investment Research

8 November 2023 25
Goldman Sachs Global Economics Analyst

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Goldman Sachs Global Economics Analyst

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