$GS, $USD, $USO, $OIL
FLASH: On the global markets, some green shoots are emerging.
The global economy may have already bottomed out, according to Goldman Sachs Group Inc. Chief Economist in a note Tuesday.
While growth remains soft, Goldman’s current activity indicator in February is slightly above the downwardly-revised December and January numbers.
Some green shoots are emerging that suggest that sequential growth will pick up from here. Still, the risk to Goldman’s global GDP forecast of 3.5% for Y 2019 ‘is probably still on the downside.’
On markets, Goldman:
- Remains positive on risk assets, although upside is now probably lower as markets have become ‘more sanguine on recession’
- Expects bond yields to rise
- Maintains a bearish USD view, given a dovish Fed and expectation for a pickup in global growth
- Is modestly bullish Crude Oil over the next 2-3 months, but sees a more bearish outlook for the remainder of the year
The case for a pickup from the current pace is strongest in the US as the drag from a tightening of financial conditions eases, according to Goldman.
Goldman also sees tentative signs of a turnaround in Chinese growth. That is in line with our snapshot of early indicators of activity:
Goldman reckons Europe looks like the weakest major region, ‘with Italy in recession, Germany close to it, and most other economies growing at only about a trend pace,’ according to the note.
Goldman has pushed back its expectations for the 1st ECB hike from late-2019 to mid-2020.
As for the Fed: Goldman says the prospects for moves in the next 6 to 9 months have fallen and an increase toward the end of the year would require a rebound in both growth and core inflation. It expects an announcement at the March meeting that the Fed will end balance sheet runoff later this year, probably in September.