Goldman Sachs Research remains confident about the global recovery in 2021, says Peter Oppenheimer, the firm’s chief global equity strategist. “We are optimistic for equity markets, risk assets and indeed the economy,” Oppenheimer says in this episode, and goes on to explain why he thinks the current bull market is transitioning from a “hope” phase to a “growth” phase. “As we move forwards in time, we do expect to see more even returns globally – less so than extreme outperformance of the US,” says Oppenheimer. “We would expect people to be diversifying more by country, region and by industry.”
This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
Welcome to our exchanges, Goldman Sachs Markets Update for Friday November twentieth. Each week we check with the leader across the firm to get a quick take and what they're watching in the markets on Jake's your global had of corporate communications in the firm in my guest today is peace. Oppenheimer Chief Global Could he strategist and head of macro research in Europe Peter is Goldman. Sachs research team are out with a new report. Titled club. Strategy outlook the bull run in twenty twenty one will be. talking about that report today Peter walk about the programme. Thank you. Jake great speed It's nice to see that sunny London backdrop. What's your latest global growth outlook for twenty twenty one well from the title of that, look peace be did here. We are optimistic persons, acting markets, risk assets and indeed the economy. If we look at the economy. First of all, we forget
lasting global growth. Next year six percent and that's quite a bit above the cat the consensus, which is a little bit more than five percent above consensus for the? U S looking at around five point, three percent growth there and and pretty much the same procedure, so strong economic recovery, albeit from a very low. Base, and one of the deepest recessions, of course, that we have for many decades. But I think that this strong outlook is supported by the press, thanks for more positive news on vaccines in the implementation of those, as well as very, I supported monetary and fiscal policy through the course of next year, This will allow the attention in the states has been around fiscal stimulus and what we can expect for the? U S, what kind of fiscal stimulus are you modelling and what does that mean? Feared economic growth forecast What are you s? Economies are expecting most probably
a fiscal beast of about a trillion dollars, probably This year is not early next year. That does it. depend a little bit on the final outcome: incense. That's the Senate and water. in Georgia. They were a democratic led in the Senate is well that that the scale of that fiscal beast with light teepee. Ultimately, Excessive two trillion dollars so depend a little bit on that in the initial period after the election that some concerns in the market about the potential we a fiscal boost to be scaled down, but on the other hand, we do still expect fiscal support to come through and less risk of rapidly. Guy in taxation. So over that which supports growth in the euro. The economy is about five point: three percent for next year,
Important points mentioned about the: U S is that savings rates of increase quite sharply through the pandemic as people of course legal S and generous employment. Support of catching comes continued reasonably good, overall so there's a lot of pent up demand and savings power to support Consumer recovery signal, in two months or likely to be difficult in the: U S and elsewhere, given rising, such rates, but from the outset cause you're onwards. We ve been expecting to see seven the tension and six percent annually this growth in the second and third courses, newer Sequoia, strongly back to take in the second half of the year. Well, yes, hopefully, will have some things to spend money on travel and the like He escaped the paradox of thrift vessel this line
debated grab what the bare market looks like to me. Most people think Cove. It was an event driven bear market which is very different than a cyclical or structural downturn. Has that fact into what you're saying around the pace of both what we saw: the peace, the collapse and the pace of recovery years read the point Jake because, as we all know, the speed of the initial collapse into bad market territory as the pandemic to cold was the fastest. Down, so that we see the most market cycles since ninety twenty nine but then again the rebound from the march, those being the most rapid we seen again since actually the period coming out of the nineteen twenty nine crisis say very we ve shaped adding for two. The first one is the very unusual nature of this recession: now this recession has been very very deep. but, as you say, it was really triggered by economic factor.
It's like rising inflation. Rising interest rates are collapsing asset since, like many recessions off, it was actually triggered, I and exhort you in a shock the pandemic, which derailed the economic cycle and was really forced on economies by government policies to constrain mobility. But states mobility rates start to improve. Taking with a vaccine, we would expect to see a very rapid rebound. The second factor is that this crisis has been managed by extraordinarily supportive policies both monetary policy as Well- very generous fiscal expansion. That combination got a long way to reduce the potential structural damage to economies in the downturn giving investors confidence that we can get out of this in a relatively short period of time, and that also help the rapid speed,
did the rebound be said, but also finally, just worth noting that, in our view, since the banks are likely to keep interest rates at these current levels in most places around zero. Well to twenty twenty fines- and that means you- got a backdrop. It extraordinarily low interest rate such negative, real interest rates, and that should be quite supportive risk us it's like equities So you have a great phrase in the report. You talk about moving from the hole, driven phase of the bull market to the growth bourbon phase, explain what hope driven phase candy markets is, and I think we understand what a growth of invasive but explain why you think that transitions in the offing, absolutely, but we ve done a lot worth looking at historical cycles, going back over a couple of centuries and equity cycle of course very lens and strengths, but they do We tend to exhibit different phases which had driven by
different factors. Sometimes prices arising as valuations go out. Sometimes his earnings go up on occasion. Of course, you get prices falling in anticipation of decline. That's really the bare phase or the despair face as we call it, but the whole phase is what we describe as the initial phase. Of a newborn market. Now these nearly always start during recessions, when It's still falling. For some reason, investors start get optimistic about a future recovery and that phase that faced hence be very strong, but almost it. really driven by rising valuations, because earnings still negative nuts really what we see missing between March however, if this year, deep recession, proof were falling, but as in fish rate slowly in the summer, and this very, supported policy came through. We got that very rapid hoped
it's an acceleration in the markets and we think we moved into what we call the gross phase which the longest possible market where most rose in the different engrossed ten to emerge and The transition between those two often is associated with high volatility. We seen that and we think this growth phase is emerging because next year were looking at global profit. Growth to be around thirty five percent. I'll bet, that's for me big forward this year about twenty percent, but that the costs in profits? We think will come through put it into the longer phase of groups in TAT people market cycle, where turns will probably be lower. Evaluations will probably start coming down a bit. One of the interesting things about the recovery markets is that it hasn't been widely dispersed, but
the rally you projecting and twenty twenty one be evident across all equities, or will certain categories or sectors be left behind, a question I think worth mentioning the context you. Nobody really dramatic things that we saw in the Kate, or so after the financial crisis? Is this your job. For me, at the? U S, equity market, many others got left behind. Also, the significant out this woman says grows tight equities is value. Cheap wreck Jason offer more cyclical companies so under before. Why did this happen? and really because we went into a decade of very low growth and low cost, stability, which meant that people would pay. Sir grows at second, the interest rates were incredibly low and that boosted the valuations attributed to very long duration, assets, growth, assets and thirdly, because we saw a tremendous success-
and out the format of the technology industry, which has much more profitable, the most others and, of course that explained the opponents of the Eu S the: U S had a much bigger waiting, a much bigger exposure said these high growing parts of Mark as we move forward in time, we do expect to see even returns globally, less of an extreme out performance of? U S, we would expect people to be diversified more by country region and by industry. We ve also argue region in recent weeks that some of the performing more action. Mickey sensitive industries and valued type pass them It should also be bound as you into an inflection point much stronger grows. Whistling revising inflationary patients backed by this policy support that we discussed today twenty twenty one should be a year good returns overall, but
which are more evenly distributed both geographically and cross. Industry or I will Peter we four to a happier new year, thanks for joining us today and will look for the senior and twenty twenty one twenty jack. That's all for this week markets up the United States, Goldman Sachs in case he missed it I other episode this week on the economy in Germany, with Wolf and think seal Goldman Sachs, Germany and Austria. Thank you for listening and hope. Everyone has great weaken this pact. was recording. On Thursday November nineteenth two thousand twenty all price references and market forecasts correspond to the date of this recording. This podcast should not be copied distributed, published or reproduced in whole or in part, the information contained in this pact. Does not constitute research or recommendation from any Goldman Sachs Entity to the listener. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty as to the accuracy or completeness of the statements or any information can
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Transcript generated on 2021-07-01.