As of September 16, 2022. Looking at 2023, Goldman foresees the euro zone growing by 2.5% and the U.S. by 2.2%. 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. We expect this year to be less turbulent for markets, with inflation moderating and major central banks approaching the end of their tightening cycles. 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. 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. Past performance does not guarantee future results, which may vary. There can be no assurance that the forecasts will be achieved. Upgrades continued to outpace downgrades through December. 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. Powered and implemented byFactSet Digital Solutions. Economic expansion, shown in the GDP growth below, started in 2020 and has only recently started to decelerate (exhibit 5). 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. 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%). BUSINESS. See here for a complete list of exchanges and delays. Unsurprisingly, investors reacted by selling municipals at a historic pace. Section III details our financial market outlook for these countries. This does not constitute an offer or solicitation with respect to the purchase or sale of any security in any jurisdiction in which such an offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. The Fed moved aggressively in 2022 to get inflation under control. The staffing shortages and expense-related challenges that plagued hospitals and continuing care retirement community (CCRC) credits in 2022 are likely to continue to for at least a portion of 2023. (AP Photo/Patrick Semansky, File / Associated Press), VOLATILE MARKETS SENDING INVESTORS RUNNING FOR REFUGE. That has Goldman cutting its U.S. There can be no assurance that the forecasts will be achieved. 2 min read. Lastly, investors will be watching how much of the higher education sector manages to navigate its way through enrollment declines and endowment investment losses. Over-levered is a term used to describe a company which has taken on too much debt. Demand should rise as tax-free yields remain elevated. Goldman Sachs Asset Management has no obligation to provide any updates or changes. States enjoyed healthy reserve growth (exhibit 6), however with the economy cooling, we are seeing a revenue-expense gap developing for 2023. The bank said Sunday it now expects US gross domestic product growth to grow by 2.4% for the year, compared with its prior estimate of 2.6%. About Us; We look forward to beginning a conversation to help you achieve your objectives and make the impact you desire. The Fed has the tricky task of trying to cool red-hot inflation without sending the US economy into a slowdown. 10-year Treasury yields ended the year around 3.90%. Mar 17, 2023 (The Expresswire) -- The Diagnostic Hammer market is a highly competitive and ever-evolving landscape that requires businesses to stay ahead of. Michael M. Santiago / Staff / Getty Images. Goldman Sachs on Wednesday lowered its forecast for fourth-quarter U.S. gross domestic product (GDP) growth, citing risks to the lending environment as smaller banks pull back on loans to preserve . Something went wrong, please try again later. This tug-of-war between views on inflation and economic data may be a persevering theme throughout the upcoming year. At this time, we expect any weakening in trends to be manageable. Learn more about us, our purpose and our commitment to clients. Using the base year, the report provides estimated market data for the . Please see additional disclosures at the end of this presentation. Goldman Sachs wrote in a note to clients that it has reduced its forecast for 2023gross domestic product (GDP)to a gain of 1.2% from the previous 1.5%. The gap between labor demand and supply will likely narrow in the next year, now that labor supply disincentives from generous unemployment insurance packages fade out, they noted. Skip Navigation articles a month for anyone to read, even non-subscribers! 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. (iStock / iStock). Future investments may or may not be profitable. All rights reserved. If prices fluctuate dramatically over a short period of time, a market is said to be highly volatile. The following questions will help us determine the right team for you. Small cap company stocks involve greater risks than those customarily associated with larger companies. (REUTERS/Andrew Kelly/File Photo / Reuters Photos). Past performance does not guarantee future results, which may vary. There can be no assurance that the forecasts will be achieved. We conclude Section I with the key risks to our outlook beyond the recession risks, primarily focused on geopolitical flare-ups and possible new COVID-19 waves originating from China. Volatility is the manner in which the price of an investment moves up and down. We anticipate headlines may start focusing on bloated budget gaps, weaker pension funding, higher OPEB contribution and ultimately some ratings pressure. 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. FAQ - New Privacy Policy. (REUTERS/Andrew Kelly/File Photo / Reuters Photos). The analysts said their assessment of the relationship between financial conditions and growth is approximate, given the uncertainties in the post-pandemic economy. Additionally, in May the SEC announced amendments to two rules, looking to both standardize disclosure and expand naming consistency of funds with ESG characteristics. All fixed income investments may be worth less than their original cost upon redemption or maturity. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Goldman Sachs raised its recession odds from 25% to 35% on Thursday. S&P upgraded 2.5 times as many issuers as downgrades. 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. 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. Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. But the gap still remains "extremely high", and it can only be narrowed if the Fed convinces companies to lower job openings. It also pertains to past performance or is the basis for previously-made discretionary investment decisions. 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. It is not research and is not intended as such. References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. Note: Separate multiple email addresses with a comma or semicolon. 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. Actual data will vary and may not be reflected here. These risks should be fully evaluated before making an investment decision. Seizing the opportunities these changes may create calls for a new approach rooted in a more holistic view of asset allocation with increased attention to risk. Defaults make up 0.03% of the ~$4TN municipal market. Source: Bloomberg. This is sharply lower than the 5.8 percent we anticipate for Q4 of this year. As yields stay elevated, consider continuing to add exposure along the yield curve. If history is any guide, 2022s negative performance may set municipal investors up for positive returns this year (see Exhibit 2). Heightened volatility was driven by persistently high levels of inflation not seen in decades, compelling the Federal Reserve to embark on a historic monetary policy tightening campaign and pushing the Fed Funds Rate from 0.25% to 4.50%1 (As of December 14, 2022). How It Works, Benefits, and Risks, Macroeconomics Definition, History, and Schools of Thought, Gross Domestic Product (GDP): Formula and How to Use It. Goldman Sachs is predicting zero earnings growth in 2023, with stocks ending the next year essentially flat. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. A great deal of variability exists with this forecasting as (1) there is debate around if and at what pace inflation returns to acceptable levels, (2) whether the U.S. enters a recession, and (3) how the Feds monetary policy will respond to economic data. Can You? Welcome to the latest edition of the How2Wealth newsletter! The pace of rating downgrades and distressed situations in the healthcare space have begun to tick up as operating margins have been pressured and cash reserves previously bolstered by COVID-19 stimulus monies and investment market outperformance have eroded. Please see additional disclosures at the end of this presentation. Other municipal investment vehicles such as, Separately Managed Accounts (SMAs), ETFs, and individual bond buying generally saw positive momentum as yields peaked during the middle of the year and into the fall. ?|d_gE;PCxP$Qv;COL^qN{t00XOWSajX
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