Goldman Sachs is out with a new note, looking at the US economy and while they note that the consensus forecast is for a technical recession for Q3-Q4 they don't believe it. They forecast 0.6% growth in Q3 and 0.9% in Q4 and say that overall the American consumer is displaying strong employment, income, wealth levels, and debt metrics, suggesting a bright outlook overall.
Goldman Sachs predicts a 2.3% growth in real spending for 2023 and an accelerated real income growth rate of 7.7% over the last three months. Additionally, households continue to draw down excess savings rapidly, and goods consumption remains above pre-pandemic trends. The current market landscape has also resulted in shifts in sector recommendations, with Goldman Sachs advocating for ownership in energy and Mmining stocks while advising against homebuilders.
Consumer Services stocks are at new relative highs, while Telecom stocks are at relative lows. Large-cap/growth stocks appear to be in a bullish consolidation phase. High FCF company stocks are underperforming. The S&P 500 index is trading at 18.4 times earnings.
- A technical recession is forecasted for Q3-Q4.
- American consumers show strong employment, income, wealth levels, and debt metrics.
- About 150k monthly payroll growth is expected in the latter half of 2023. Real income growth has accelerated to a 7.7% annualized pace over the last three months.
- Households continue to rapidly draw down excess savings.
- Goods consumption remains above pre-pandemic trends despite reopening and fiscal retrenchment.
- Post-pandemic wage growth is still above pre-pandemic levels.
- Disposable incomes have outpaced inflation across all income segments.
- Post-pandemic growth in labor income and goods spending is skewed towards lower- and middle-income households.
- Cash on consumer balance sheets is falling gradually.
- Services PMIs are decent, while manufacturing is weak.
- Consumer Services stocks are at new relative highs, while telecom stocks are at relative lows.
- Large-cap/growth stocks appear to be in a bullish consolidation phase.
- High FCF company stocks are underperforming.
- The S&P 500 index is trading at 18.4 times earnings.
h/t @MikeZaccardi