Goldman Sachs just released their
10 market themes for 2014, and now the bank’s top economists are holding a conference call with clients about their forecasts for next year and beyond.
Chief economist Jan Hatzius explained that Goldman Sachs’ growth forecast for U.S. GDP is 2.9%, above the consensus estimate.
While the “repeated false starts of the past few years” serve as a reminder of how difficult economic forecasting can be, Hatzius says he believes that this time around we have a “clear reduction in the fiscal drag by about one percentage point.”
Basically, Hatzius says that if the private sector can perform like they have this year, 2014 will be stronger given the “ease” of public drag.
On the topic of interest rates, Hatzius highlighted the fact that the Yellen Fed will continue to look to employment figures before making major monetary policy changes. And U.S. employment is still “far too low.” Check out the chart:
There has been “some fiscal relief in Europe,” with the recession there ending. But Hatzius noted that incremental reduction in fiscal drag in 2014 will be slower in Europe than in the U.S.
On emerging markets, Goldman’s Dominic Wilson says that 2014 will show some modest growth after the slowing we’ve seen recently. But growth acceleration will not be as sharp as in developed markets.
Wilson said that we’ll see more differentiation among EM nations in 2014. But the more an EM country is tied into developed markets in terms of exports and the like, the more it will benefit from 2014 growth.
After a severe downgrade in the market’s views on China this year, Wilson says that some new signs of stability there may reassure investors.
Wilson also believes that equity markets have not yet priced in the kind of growth we’ll see in 2014 (in part, that’s because Goldman’s growth view is above consensus). But Wilson argues that the market won’t really “believe” the recovery until it “sees” it — perhaps from the kind of GDP readings Goldman thinks will happen.
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