Banking giant Goldman Sachs believes that powerful tailwinds are gathering to propel a sluggish US economy.
In a new CNBC interview, Tony Pasquariello, the head of hedge fund client coverage at Goldman Sachs, says the US economy is one Fed cutting cycle away from coming back to life.
He also believes that the macro setup is very favorable for the stock market based on historical precedent.
“The recipe, if our economists are correct, to get back to trend growth, would be the Fed is going to ease, so you have monetary tailwind. Do not fight the Fed, particularly in the absence of recession. The history book is very clear on that.
The history book is also very favorable when the Fed cuts at or near the highs in the stock market. I think that’s only happened nine times since 1990. One year forward, you’re higher in all [9] occurrences.
So a fiscal tailwind, a monetary tailwind, distance from peak tariff uncertainty. That would be the recipe to get the US economy going again.”
Turning to monetary policy, Goldman Sachs predicts that the Federal Reserve will cut rates multiple times in the coming months, with more to come next year.
“So our view is they’re going to go three times this year: September, October, December, so sequential. Two more times next year on a quarterly pace makes five.
So when we’re sitting here next June, the funds rate is not 4.375%; it’s 3.125%.”