Answers To Top 8 Questions From Goldman Sachs Group Inc (GS)’s Jan Hatzius
As the year nears to a close, there is always anxiety among investors’ as to what is in store for them next year. The obvious questions that would confront the investors’ minds were addressed by Goldman Sachs Group Inc (NYSE:GS)’s Chief Economist, Jan Hatzius. There were at least eight questions that he answered that should shine a light on what he expects for the next year for investors.
Given the fact that the economy in the U.S. performed well the last few years, the question that haunts everyone’s mind is whether it will extend the gains of previous years and whether it would be above recent trends. He has responded by saying a firm yes. He also said that domestic strength would be able to compensate for weaknesses from any other country.
The second question that haunts American investors’ was in relation to the dollar’s role in economic growth since the Greenback has been witnessing strength. Goldman Sachs’ Chief Economist has not only affirmed it but indicated that it was manageable in the near term due to weak prices of oil.
The Housing sector has been on the sidelines for a long time after the financial crisis. Therefore, investors’ are eager to hear any details about the expected pace of the housing recovery. Hatzius believes that the single-family sector will accelerate on the strength of many young adults moving away from their parents’ homes, thusly he believes household formation will also improve.
Regarding Consumer spending growth, Goldman Sachs’ chief economist has hopes that the fall in oil price will allow for more disposable income at the hands of consumers to spur growth in the economy.
Hatzius said that he has not witnessed any growth acceleration in capital spending. He added that the oil price drop would likely hurt the energy sector. However, he does not see the capital spending depressed as far as the long-term fundamentals were concerned.
As far as wage growth, Goldman Sachs chief economist said that he does not see 3-4% growth identified by Chair Yellen to happen. He said that the labor market was still slacking.
Inflation And Interest Rates
He was also categorical in saying that the core inflation would not likely reach the Fed’s target of 2% citing strong dollar, weak oil price, and lower wage growth.
Goldman Sachs’ chief economist also does not see Fed hiking interest rates by June, mainly because inflation will be unlikely to reach the Fed target of 2%. He expects interest rate hikes to happen after June next year.
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