Goldman Sachs Says Fed Will Not Be Supporting Stocks Until 2024
We finally have January's job report from the USA, and it shows a strong labor market. But for the investors, it means bad news as the Fed now has no reason to slow down its rate hike cycles.
Earlier, there was a hope that the Fed would try to support the economy if the jobs report was not strong enough. But the recent report has shown a strong labor market. This means that the Fed can continue its battle to bring back inflation around the 2% target.
In other words, the analysts at Goldman Sachs believe that Fed has little reason to support the stocks by lowering the interest rate.
US Interest Rate Will Remain Above 5% Until 2024
As per Goldman Sachs, Fed is expected to raise its interest rate policy to 5% or higher in 2023. After this, the interest rate will remain at high levels until the year 2024!
But if we look at the markets, most of the traders believe that the Fed will start to introduce interest rate cuts by the end of 2023.
However, Goldman's view is exactly the opposite of what the market believes could happen. According to them, the interest rate in the USA will reach the lower range of 5 rather than the upper range of 4.
In addition, Goldman Sachs also believes that we will not see any rate cuts by the Fed until we enter 2024.
If we look at the Fed's view, a poor labor market report is an indication that the economy is slowing down due to high-interest rates. But with a better-than-expected jobs report, Fed will have more room to introduce new rate hikes.
For now, the US economy is still strong, and the labor market is also showing signs of resilience. In addition, inflation has also started to slow down, and by the end of 2023, it will reach 3%. And by 2024, inflation in the USA is expected to touch 2.5%.