Goldman Sachs Predicts Return to Pre-2008 Economic Conditions with Positive Global Growth in 2024
In a recent report released to clients by Goldman Sachs, strategists have forecasted that the global economy is on track to return to pre-2008 conditions. They highlighted that the global economy has exceeded expectations in 2023, and they predict that disinflation will continue in the year ahead.
Goldman Sachs has assigned a 15% probability of recession for 2024, while they anticipate that tailwinds will bolster global growth and investments as the macroeconomic landscape shifts to pre-2008 conditions.
The report, titled “The Hard Part Is Over,” underscores the surprising outperformance of economies worldwide throughout 2023. Jan Hatzius, leading the team of analysts, stated, “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 strategists acknowledge the shift away from the easy-money era, with a rocky transition to higher rates evidenced by stock market volatility and a rising number of “zombie” corporations facing financial distress. They express doubts regarding Europe, where sovereign stress may reemerge.
Concerns over heavily indebted firms and a more challenging business environment are noted in the wake of the potential transition to a higher-rate environment, reflecting the Fed’s response to the Great Financial Crisis. This move could result in a wave of distressed debt and troubled balance sheets in the coming months, according to analysts.
Looking ahead to 2024, Goldman Sachs expects returns in rates, credit, equities, and commodities to outperform cash. They anticipate real expected returns to be firmly positive, reflecting a more normal investment environment compared to previous years.
While Goldman Sachs envisions a decline in inflation, potential risks for 2024 have also been identified, particularly if central banks keep interest rates high for longer than expected. Concerns over growth, including a possible delay in global manufacturing recovery, have also been cited as potential downside risks.
Overall, the report signals optimism for continued positive global growth in the year ahead.
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