☀️ Goldman's Sunny Forecast

This week, Goldman Sachs cut the probability that the U.S. economy will enter a recession in the next year.

"September is the other January."

— Gretchen Rubin

👋 Friends, Rallie here. The newsletter welcoming you into September with the latest in crypto, finance, and tech.

On the menu:

  • ☀️ Goldman's Sunny Forecast

  • 🗞️ Headlines That Hit

  • 📈 Refresh: Understanding U.S. Interest Rates

  • 💯 Top Tweets

The Rallie Recap

📊 Recession or no recession? This week, Goldman Sachs cut the probability that the U.S. economy will enter a recession in the next year. Here’s what you need to know:

  • For the third month in a row, Goldman Sachs is feeling bullish. They've once again trimmed the chances of the US hitting a recession in the next year. 

  • Their current mood? 🌤 “Soft landing summer”…and here’s the magic number: 15% chance of recession for the next 12 months, down from a previous 20%.

  • Why the optimism? Some highlights: 

    • 📈 Positive inflation & labor market signals. Data over the summer was stronger than most expected.

    • 💪 Predictions show the US economy maintaining a 2% growth annually until the end of 2024. A steady path!

  • In the note, Chief Economist at Goldman Sachs, Jan Hatzius, said, "The economy has continued to be pretty resilient. We're growing at 2% plus. We think that's going to be true in 2024 as well. Income growth looks supportive. Job growth is still pretty, pretty significant. And at the same time, the labor market has gotten more rebalanced."

  • However not everyone is as optimistic…

  • 📊 Bloomberg's Gloom vs. Goldman's Bloom: Interestingly, Bloomberg’s analysts are on a different page with a stark 60% chance of a downturn in the same period. Drama!

  • 🌐 What’s the Wall Street Buzz? A majority are singing in Goldman’s choir, feeling positive. But there are some cautioning about potential speed bumps, mainly related to the Fed's past aggressive interest rate moves.

  • 🚀 Looking Ahead: Goldman's stance? They're bullish about the labor market, hinting that recent upticks in unemployment are just a sign of more people joining the workforce - which could bolster consumer spending.

    🏦 Fed's Next Moves: Goldman places their bets on the Fed being done with rate hikes. Hatzius also wrote that, “Our confidence that the Fed is done raising rates has grown in the past month.” Hopefully GS is right!

Headlines That Hit

Rallie Refresh: Understanding U.S. Interest Rates

💵 Ever wondered how the U.S. Federal Reserve's crystal ball works when it comes to setting interest rates? It's not magic, nor is it a whimsical game of darts. In fact, the Fed balances a number of factors to ensure sustainable economic growth without excessive inflation.

Here’s a list of the main factors that affect interest rates:

  • Inflation Targeting 🎯: The Fed aims for a 2% inflation rate to keep prices stable.

  • Unemployment Rate 📉: Watching job numbers. High unemployment might lead to lower rates.

  • Economic Growth 📈: Measured by GDP. Strong growth can trigger rate hikes.

  • Global Economic Conditions 🌍: Monitoring international events and their potential impacts.

  • Financial Market Stability 🏦: Keeping an eye on market volatility.

  • Consumer Spending 💳: Tracking how much the public is buying.

  • Business Investments 🏢: Watching corporate borrowing and spending.

  • Housing Market 🏠: Observing mortgage rates and construction activity.

  • Consumer and Business Confidence 🤝: Gauging perceptions of the future.

  • Bank Lending Practices 🏛: Ensuring banks lend responsibly.

🚀 So there you have it — we've demystified the Fed's rate-setting decision-making. In understanding these factors, we gain a clearer perspective on the intricate balance the Federal Reserve strives to maintain to ensure the stability and growth of the U.S. economy.

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DISCLAIMER: This is not financial or legal advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions.