Goldman Sachs are still expecting rate cuts from the Federal Open Market Committee (FOMC) in 2024:
- Fed cuts are not imminent
- expect the next few inflation reports to be softer
- and have thus stuck with forecasting a cut in July and then in November
GS warn that "even moderate upside surprises could delay cuts further".
On US stocks:
- equity valuations are constrained by rising bond yields that reflect investor fears of persistent inflation, but even in the face of climbing rates, the S&P 500 has returned 6% this year and is just 4% below its all-time-high
- but stocks can continue to rally if higher-for-longer interest rates are driven by resilient economic growth as opposed to hawkish policy
- two-thirds of companies have beaten EPS estimates with an average surprise of 9%
- flood of generally positive micro earnings results
- “We expect earnings growth will lift the index by 3% to our year-end target of 5200. While our economists expect continued disinflation that will lead to rate cuts later this year, the delayed interest rate cuts should constrain equity valuations”
