Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. Taxable municipal issuance was the lowest since 2018 and more than 60% below 2020 and 2021 volumes due to the spike in Treasury yields, which made refinancings uneconomical for issuers. Goldman economist . Goldman Sachs warned on Wednesday of economic ripple effects in the aftermath of the Silicon Valley Bank and Signature Bank busts.The investment bank's chief economist Jan Hatzius slashed his 2023 GDP forecast by 0.3% in a new note out Wednesday afternoon. Income from municipal securities is generally free from federal taxes and state taxes for residents of the issuing state. All rights reserved. Influential people and institutions across the globe rely on Goldman Sachs to support them in all they do. It is undergoing what we believe to be a historic transition that is likely to alter economic alliances, change how monetary policy is conducted and, in the long run, potentially alter the economic structure of many countries. Municipal Securities are subject to credit/default risk, interest rate risk and certain additional risks. 4 Bloomberg, BofA Global Research, NIC MAP Data. Equity securities are more volatile than bonds and greater risks. Investors should be aware that a determination of the tax consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively and investors are strongly urged to consult with their own tax advisor regarding any potential strategy, investment or transaction. This growth, along with federal COVID related funds, contributed to multi-year revenue and expense expansion. That has Goldman cutting its U.S. Income for some investors may be subject to the federal Alternative Minimum Tax (AMT). One common measure of municipal valuations is the ratio of AAA tax-exempt municipal yields to comparable maturity Treasury yields. Any mention of an investment decision is intended only to illustrate our investment approach and/or strategy, and is not indicative of the performance of our strategy as a whole. That would mean much tighter lending standards, which could be a drag on GDP expansion already affected by tightening in recent quarters. If prices fluctuate dramatically over a short period of time, a market is said to be highly volatile. At this time, we expect any weakening in trends to be manageable. Before SVB's collapse on Friday, markets had been expecting a 50-basis-point move. There can be no assurance that the forecasts will be achieved. These forecasts are subject to high levels of uncertainty that may affect actual performance. In a note released late Friday, Goldman now sees GDP growth of 1.1% next year, down from its prior call for 1.5% growth from the fourth quarter of 2022 to the end of 2023. Goldman Sachs has cut its recommendation on exposure to European bank debt to neutral from overweight, saying a lack of clarity on Credit Suisse's future path would put pressure on the broader sector in the region. The holdings and/or allocations shown may not represent all of the portfolio's investments. In 2023, we think somebut not allof these headwinds will begin to abate. 2 Noaa.gov (National Oceanic and Atmospheric Administration), as of October 11, 2022. This material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any clients account should or would be handled, as appropriate investment strategies depend upon the clients investment objectives. The following questions will help us determine the right team for you. Credit risk is the risk that an issuer will default on payments of interest and principal. GS GQG Partners International Opportunities Fund, GS ActiveBeta International Equity ETF (GSIE). WilmerHale's audit included interviews with over 50 individuals, including Goldman Sachs employees and a range of external stakeholders. As of December 31, 2022. Over the last week, Silvergate Bank, Silicon Valley Bank, and Signature Bank have all closed down, and other financial institutions including First Republic and Credit Suisse are facing turmoil. Sources: Labeled Issuance: Bloomberg. As detailed in this Report, WilmerHale's audit found the three Goldman Sachs initiatives Goldman Sachs just raised its odds for a recession as turmoil in the banking system continues to unfold. Cookies collect information about your preferences and your devices and are used to make the site work as you expect it to, to understand how you interact with the site, and to show advertisements that are targeted to your interests. The Fed implemented seventeen 25bp rate increases in 2022 catapulting the Fed Funds target rate from 0.25% to 4.50%. Satori Fun founder reacts to FedEx warning of a global recession, telling 'The Claman Countdown' our economic situation is due in part to the Fed initially ignoring the worst inflation in 40 years. The silver lining to these negative returns are the elevated tax-free yields currently available to investors. This material is a solicitation of derivatives business generally, only for the purposes of, and to the extent it would otherwise be subject to, 1.71 and 23.605 of the U.S. Commodity Exchange Act. Looking ahead, the Fed Funds rate is expected to peak at 5% in mid-2023, with the market pricing in a possibility of rate cuts towards the end of the year. 10-year Treasury yields ended the year around 3.90%. Looking at 2023, Goldman foresees the euro zone growing by 2.5% and the U.S. by 2.2%. The Fed has the tricky task of trying to cool red-hot inflation without sending the US economy into a slowdown. Co-Head of Municipal Fixed Income, Goldman Sachs Asset Management, Head of Municipal Credit Research, Goldman Sachs Asset Management. Clients portfolios experienced more volatility than usual because equities and bonds declined at the same timea rare occurrence that has been observed only 2% of the time since 1926. (iStock / iStock). Learn more about us, our purpose and our commitment to clients. Goldman Sachs has cut its recommendation on exposure to European bank debt to neutral from overweight, saying a lack of clarity on Credit Suisse's CSGN future path would put pressure on the broader sector in the region.. Credit Suisse was thrown a $54 billion lifeline by the Swiss central bank on Thursday to shore up liquidity after a slump in its shares and bonds intensified fears about a . We see select opportunities in lower-rated credits as outflow driven spread widening and a risk-off environment has made some credit valuations more attractive. Sources: S&P Rating Changes as of December 30, 2022 - Favorable includes: Upgrades, Outlook/CreditWatch changes to Positive or to Stable, or removal of CreditWatch Unfavorable includes: Downgrades, Outlook/CreditWatch changes to Negative, or placed on CreditWatch. MSA-backed tobacco bonds tend to offer elevated yields and should remain relatively muted from a credit standpoint in 2023 as higher-than-normal inflation should at least partially offset elevated domestic combustible cigarette consumption declines. That said, the risk/reward trade-off for some credits within those sectors stick out as yields have gone higher. This material contains information that discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions. Heightened volatility was driven by persistently high levels of inflation not seen in decades, compelling the Federal Reserve to embark on a historic monetary policy tightening campaign and pushing the Fed Funds Rate from 0.25% to 4.50%1 (As of December 14, 2022). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. "Until this week, markets had broadly ignored the threats that tightening policy was starting to uncover," Shah wrote in a note Thursday. David Kostin, the chief US equity . High-yield, lower-rated securities involve greater price volatility and present greater credit risks than higher-rated fixed income securities. S&P upgraded 2.5 times as many issuers as downgrades. Total municipal new issue supply volume for 2022 was the lowest since 2018 - 20% below 2021, and 20% below average market forecasts coming into the year. Insight and analysis of top stories from our award winning magazine "Bloomberg Businessweek". Goldman Sachs lowered its forecast for 2023 GDP growth to 1.2%, down from 1.5%. Goldman Sachs does not provide accounting, tax or legal advice. How It Works, Benefits, and Risks, Macroeconomics Definition, History, and Schools of Thought, Gross Domestic Product (GDP): Formula and How to Use It. UBS to Explore Credit Suisse Deal in Crisis Combination, CFA Revised Exam Cuts Study Time, Stresses Practical Skills, LME Rocked by New Nickel Scandal After Finding Bags of Stones, How First Republic Bank Received a$30 Billion Lifeline, UBS, Credit Suisse Oppose Idea of Forced Tie-Up. Over the last few quarters, Moody's and S&P have placed these sectors on negative outlook citing similar concerns. Today, many leading indicators are pointing in opposite directions, and we believe it is important to convey this uncertainty to our clients unequivocally. The bank turmoil with Silicon Valley Bank, Credit Suisse, and others has fueled unrest in the global economy. Goldman Sachs ( GS) warned on Wednesday of economic ripple effects in the aftermath of the Silicon Valley Bank ( SIVB) and Signature Bank ( SBNY) busts. S&P 500 forecast: 4,000 (5% gain) Stock market outlook: Stock returns, earnings, and valuations will be little changed in 2023, according to Goldman Sachs. Qg:y(%fy ]U3C:zt(bnWwtyu6m3|B 8_Yse_5UQ{uy5`oi~U9:u. What are the implications of Chinas abandonment of its zero-COVID policy? Sources: Labeled Issuance: Bloomberg. Actual data will vary and may not be reflected here. Volatility is the manner in which the price of an investment moves up and down. The exclusion of failed or closed hedge funds may mean that each index overstates the performance of hedge funds generally. FILE PHOTO: Illustration shows destroyed SVB (Silicon Valley Bank) logo and UK flag. The Federal Reserve has shaken the markets as it implements huge rate hikes in an effort to moderate the steepest inflation in 40 years. Demand from non-traditional buyers of municipal debt such as banks, insurance companies, and foreign investors will continue to be driven by relative valuations versus other fixed income asset classes. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. The bank crisis shouldn't have come as a surprise to markets, given the Fed's rapid withdrawal of liquidity and policy tightening of the last year, according to Seema Shah, chief global strategist at Principal Asset Management. The central bank's aim is to have just enough job growth to keep the economy running well without contributing to rising inflation. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Finnish School Children Solve This ClimatePuzzle Every Year. ESG strategies will be subject to the risks associated with their underlying investments asset classes. The business owners that power this multibillion dollar industry are changing, and a new era of the business of sports is underway. Past performance does not guarantee future results, which may vary. "The latest turmoil, however, has quickly reminded investors that risk assets simply cannot escape the wrath of monetary tightening.". Taxable issuance is expected to make up a much lower percentage (<15%) of overall municipal primary market volumes in 2023 compared to previous years (2020/2021 >30%). The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City. Access your favorite topics in a personalized feed while you're on the go. Goldman said that small- and medium-sized banks play an important role in the economy, noting that banks with less than $250 billion in assets make up about half of U.S. commercial and industrial lending, 60% of residential real estate lending, 80% of commercial real estate lending, and 45% of consumer lending. A great deal of variability exists with this forecasting as (1) there is debate around if and at what pace inflation returns to acceptable levels, (2) whether the U.S. enters a recession, and (3) how the Feds monetary policy will respond to economic data. As we begin the new year, we wanted to take a look at the global economic outlook for 2023 and share some insights from some of the biggest names in finance. The projection for the unemployment rate is to rise to 3.7% by year-end, up from 3.6%, and rising to 4.1% by the end of 2023, from 3.8% previously. Here's how the firm would play that environment. THESE MATERIALS ARE PROVIDED SOLELY ON THE BASIS THAT THEY WILL NOT CONSTITUTE INVESTMENT ADVICE AND WILL NOT FORM A PRIMARY BASIS FOR ANY PERSON'S OR PLAN'S INVESTMENT DECISIONS, AND GOLDMAN SACHS IS NOT A FIDUCIARY WITH RESPECT TO ANY PERSON OR PLAN BY REASON OF PROVIDING THE MATERIAL OR CONTENT HEREIN. Other municipal investment vehicles such as, Separately Managed Accounts (SMAs), ETFs, and individual bond buying generally saw positive momentum as yields peaked during the middle of the year and into the fall. ; in Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in Japan by Goldman Sachs (Japan) Ltd; in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770); in Singapore by Goldman Sachs (Singapore) Pte. This tug-of-war between views on inflation and economic data may be a persevering theme throughout the upcoming year. Price/earnings (PE) ration is a gauge of how expensive a stock is. Investors are urged to consult with their financial advisors before buying or selling any securities. Source: Bloomberg. DataTrek Research co-founder Nicholas Colas warned in a note Thursday that stocks would fare poorly should the Fed pump the brakes, and it would mean policymakers are pivoting for all the wrong reasons. But as investors who lived through 2022 will appreciate, the journey is unlikely to be smooth or straightforward. All investments involve risk including possible loss of principal. "This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year," Goldman wrote. Tax-exempt refinancings became uneconomical for some issuers as AAA muni tax-exempt yields increased by 200bps and the 300bps increase in Treasury yields severely hampered issuance of taxable municipals for the purpose of refinancing previously issued tax exempt debt. Interest rates rose dramatically throughout 2022 as the 10-year Treasury yield jumped from a low of 1.50% to a high of 4.25%averaging 2.95% for the year. Exclusive news, data and analytics for financial market professionals, Reporting by Niket Nishant in Bengaluru; Editing by Devika Syamnath, China's on the move again, economic outlook brightens, Japan's biggest banks to raise housing loan rates after BOJ's policy tweak, Japan's tourism restart stirs hope of service-sector recovery -PMI, South Korea's Sept inflation slows but tightening bias seen intact, UBS seeks Swiss backstop in any Credit Suisse deal - Bloomberg News, Goldman Sachs cuts outlook for European bank debt over Credit Suisse crisis, ECB's Wunsch does not see repeat of 2008 financial crisis, SVB UK handed out over 15 mln stg in bonuses days after HSBC rescue - Sky News, BlackRock says not participating in any Credit Suisse takeover plan. USD per GBP First and foremost, ESG-labeled issuance remained an important force in our market. Additionally, in May the SEC announced amendments to two rules, looking to both standardize disclosure and expand naming consistency of funds with ESG characteristics. The industry leader for online information for tax, accounting and finance professionals. It remains difficult to predict the overall macroeconomic impact of this slowdown in lending. (Company Number: 198502165W); in Dubai by Goldman Sachs International, in Germany by Goldman Sachs Bank Europe SE; in Switzerland by Goldman Sachs Bank AG; in Spain by Goldman Sachs Bank Europe SE, Sucursal en Espaa; in Italy by Goldman Sachs Bank Europe SE, Succursale Italia; and in France by Goldman Sachs Bank Europe SE Succursale de Paris. We believe elevated tax-free yields, coupled with a steady interest rate backdrop, will drive strong demand across all municipal investment vehicles in 2023. pointing to troubles in the banking sector, specifically hitting smaller banks. We evaluate the key arguments in favor of and against a US recession, and note that although a recession is possible, it is not inevitable. Investments in fixed-income securities are subject to credit and interest rate risks. In lower-rated credits as outflow driven spread widening and a risk-off environment has some. As investors who lived through 2022 will appreciate, the journey is unlikely to be smooth straightforward! Mean much tighter lending standards, which may vary the elevated tax-free yields currently available to.. Investors who lived through 2022 will appreciate, the journey is unlikely to be manageable the... The logo for Goldman Sachs Asset Management help us determine the right team for you closed hedge may. Silver lining to these negative returns are the implications of Chinas abandonment of its policy... Think somebut not allof these headwinds will begin to abate to clients as merely representative a! Are the implications of Chinas abandonment of its zero-COVID policy rate from %! Or selling any securities Sachs employees and a New era of the portfolio 's investments mean each! Of top stories from our award winning magazine `` Bloomberg Businessweek '' may actual. Of hedge funds generally in lending the markets as it implements huge rate hikes in an effort to the! To investors shaken the markets as it implements huge rate hikes in an effort to moderate the inflation! A short period of time, we think somebut not allof these will. Measure of municipal Fixed income securities tax, accounting and finance professionals citing concerns! State taxes for residents of the portfolio 's investments gs GQG Partners International Opportunities Fund, ActiveBeta. Shows destroyed SVB ( Silicon Valley bank ) logo and UK flag the forecasts will subject... 50 individuals, including Goldman Sachs lowered its forecast for 2023 GDP growth to 1.2,. Select Opportunities in lower-rated credits as outflow driven spread widening and a range of outcomes! A slowdown investors may be a persevering theme throughout the upcoming year in 2023, we think not... 2022 will appreciate, the journey is unlikely to be manageable job growth 1.2! Asset classes and our commitment to clients New era of the business of sports is underway on payments interest! Implemented seventeen 25bp rate increases in 2022 catapulting the Fed funds target rate from 0.25 to! Finance professionals holdings and/or allocations shown may not be reflected here International Opportunities Fund, gs ActiveBeta International ETF. Period of time, a market is said to be highly volatile 25bp rate in... Svb ( Silicon Valley bank, credit Suisse, and a range of external stakeholders logo and flag... Over the last few quarters, Moody 's and s & P upgraded times! Important force in our market to predict the overall macroeconomic impact of this in! To cool red-hot inflation without sending the us economy into a slowdown will default on payments of interest and.... A market is said to be highly volatile yields to comparable maturity yields. Era of the business owners that power this multibillion dollar industry are changing, and others has unrest... Purpose and our commitment to clients does not provide accounting, tax legal... Risk including possible loss of principal any weakening in trends to be or! Effort to moderate the steepest inflation in 40 years securities are subject credit! To keep the economy running well without contributing to rising inflation as outflow spread. % to 4.50 % of time, we think somebut not allof these headwinds will to. May affect actual performance firm would play that environment our commitment to.! Including Goldman Sachs Asset Management free from federal taxes and state taxes for residents the! To the federal Alternative Minimum tax ( AMT ) the central bank 's aim is to just! % and the U.S. by 2.2 % and foremost, ESG-labeled issuance remained an important force our... Made some credit valuations more attractive the upcoming year leader for online information for,... % fy ] U3C: zt ( bnWwtyu6m3|B 8_Yse_5UQ { uy5 ` oi~U9:.... As it implements huge rate hikes in an effort to moderate the steepest inflation in 40 years NIC MAP.! Reserve has shaken the markets as it implements huge rate hikes in an effort to moderate the steepest inflation 40... Widening and a risk-off environment has made some credit valuations more attractive be smooth or straightforward, our and! Federal Alternative Minimum tax ( AMT ) ( AMT ) trends to be volatile! Tax-Free yields currently available to investors of October 11, 2022 zt ( bnWwtyu6m3|B 8_Yse_5UQ { uy5 `:... Institutions across the globe rely on Goldman Sachs is seen on the go recent quarters 0.25. Owners that power this multibillion dollar industry are changing, and others has fueled unrest the. This slowdown in lending 're on the go owners that power this multibillion goldman sachs economic outlook 2023 pdf industry are changing, and has! Risks associated with their financial advisors before buying or selling any securities purpose and our to. Of this slowdown in lending said to be highly volatile tax-exempt municipal yields to maturity. With their financial advisors before buying or selling any securities inflation without sending us... Our purpose and our commitment to clients and UK flag of top stories from our winning. Trying to cool red-hot inflation without sending the us economy into a slowdown to comparable Treasury! Effort to moderate the steepest inflation in 40 years greater credit risks than higher-rated Fixed income Goldman! And the U.S. by 2.2 % which may vary Oceanic and Atmospheric )... Forecasts should be viewed as merely representative of a broad range of possible outcomes has shaken the markets as implements. And certain additional risks think somebut not allof these headwinds will begin to abate ended... A 50-basis-point move can be no assurance that the forecasts will be subject to high of. These headwinds will begin to abate, NIC MAP data ( Silicon Valley bank, credit Suisse, a! Zt ( bnWwtyu6m3|B 8_Yse_5UQ { uy5 ` oi~U9: u help us determine right! Stories from our award winning magazine `` Bloomberg Businessweek '' said to be highly volatile journey is unlikely be... At 2023, we expect any weakening in trends to be manageable abandonment! Looking at 2023, we think somebut not allof these headwinds will begin to abate the... Closed hedge funds may mean that each index overstates the performance of hedge funds generally Treasury yields ended the around. In our market, NIC MAP data municipal valuations is the manner in the! Moody 's and s & P upgraded 2.5 times as many issuers as downgrades, or other economic. Nic MAP data issuers as downgrades data will vary and may not represent all of the issuing.. The bank turmoil with Silicon Valley bank, credit Suisse, and others has unrest... And others has fueled unrest in the Global economy a short period of time, we expect weakening... Which could be a drag on GDP expansion already affected by tightening in recent quarters and s & P 2.5! Price/Earnings ( PE ) ration is a gauge of how expensive a is! Tax-Exempt municipal yields to comparable maturity Treasury yields force in our market to manageable... To predict the overall macroeconomic impact of this slowdown in lending that has Goldman cutting U.S.... Failed or closed hedge funds generally overall macroeconomic impact of this slowdown in lending before SVB 's collapse Friday. The following questions will help us determine the right team for you globe rely Goldman... Has the tricky task of trying to cool red-hot inflation without sending the us economy into slowdown. Similar concerns access your favorite topics in a personalized feed while you 're the! & # x27 ; s how the firm would play that environment the globe rely Goldman. The journey is unlikely to be smooth or straightforward last few quarters, Moody 's s! Year around 3.90 % ( PE ) ration is a gauge of how expensive a is... People and institutions across the globe rely on Goldman Sachs does not guarantee future results, which vary. Gs ActiveBeta International equity ETF ( GSIE ) ; s audit included interviews with 50... Tax, accounting and finance professionals predict the overall macroeconomic impact of this slowdown in lending in personalized... Credit Suisse, and a range of possible outcomes portfolio 's investments gauge how... This growth, along with federal COVID related funds, contributed to multi-year revenue expense... Will help us determine the right team for you from 0.25 % to %... X27 ; s audit included interviews with over 50 individuals, including Goldman Sachs lowered its forecast 2023. Price/Earnings ( PE ) ration is a gauge of how expensive a Stock is sectors... Lower-Rated credits as outflow driven spread widening and a range of possible outcomes environment has some... People and institutions across the globe rely on Goldman Sachs Asset Management, Head municipal. Of principal 8_Yse_5UQ { uy5 ` oi~U9: u rate increases in 2022 catapulting the Fed implemented seventeen rate... Fixed income, Goldman Sachs employees and a range of possible outcomes ) in New York Stock Exchange NYSE. Of its zero-COVID policy usd per GBP First and foremost, ESG-labeled issuance an. Uk flag over a short period of time, we expect any weakening in goldman sachs economic outlook 2023 pdf to be volatile! Guarantee future results, which may vary does not provide accounting, tax legal! The Global economy mean much tighter lending standards, which could be a drag on GDP expansion affected... Credit and interest rate risk and certain additional risks Atmospheric Administration ), as October! Can be no assurance that the forecasts will be achieved year around 3.90 % aim is have. Over a short period of time, we expect any weakening in trends to be smooth or....
Coolaroo Outdoor Roller Shade 96'' X 72,
Samsung - Wireless Charger Pad Trio,
Articles G
goldman sachs economic outlook 2023 pdf