By Senat Garahmedovic
Goldman Sachs (NYSE: ) strategists now expect US fundamentals to be 4.75-5%. The bank’s latest forecast calls for another 25 basis point (bp) hike in March 2023. Overall, Goldman predicts a 75 bp hike in November and a 50 bp hike in December, with two more 25 bp moves. bp in February and March.
The Fed is expected to raise rates this month and raise the Fed funds rate to 3.75-4%. Goldman strategists expect Fed Governor Jerome Powell and the FOMC, the nation’s monetary policy committee, to cut rates to 50bps in December.
They highlighted three reasons why the Fed may extend the bullish cycle beyond February.
“First, inflation is likely to remain at an uncomfortably high level for the time being, prompting small rate hikes. Second, now that fiscal tightening is almost over and real incomes are growing again, further rate hikes may be needed to keep the economy on a low-growth path. Third, a change in stance in the near future could affect financial conditions. If it leads to early easing, the FOMC may need to do more.
In this context, Goldman’s top equity strategists recommended that clients invest in stocks with high cash income and growth.
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