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Marcus is excited to share this insight from our colleagues at Goldman Sachs Asset Management’s Strategic Advisory Solutions, highlighting some of the latest issues and trends in the financial markets. You can also read the original version of this article here.

May 2022

A real pain at the pump. The prices US consumers are paying for energy have jumped 186% above pre-Covid-19 levels. Demand is slowing down, as some of us may be rethinking our driving habits. 

We still have clogs in the pipes. April saw signs of improvement in the supply chain congestion. But some problems are still with us, continuing to raise prices. For example, about 1.25 million tons of grains and oilseeds are stuck on vessels blocked in Ukrainian seaports.

What could make high inflation stubborn? Oil prices and continuing supply issues may be part of today’s inflation problem. But truly persistent inflation would be driven by wage growth and inflation expectations.  

How could expectations potentially affect inflation?

Think about it this way. Expectations could have an impact if people act on them. If businesses expect higher inflation, they may raise their prices, knowing consumers expect and therefore are more likely to accept and pay higher prices.

If workers expect higher inflation, they may ask for larger wage increases. The combination of businesses, workers and consumers acting on their expectations of soaring prices may cause high inflation to stick around.

Playing quarterback. After this month’s 50 basis point (0.50%) rate hike by the Fed (Federal Reserve), two others of the same scale are expected to follow in June and July. 

Sturm und Drang. World events and nervousness about Fed rate hikes have made the stock market a pretty volatile place. More market turbulence may come in the Fed’s quest to tighten financial conditions and tame inflation. But it might not affect every stock – some companies’ first quarter earnings were welcome shots of sunshine through the clouds. Our colleagues at Goldman Sachs Asset Management say that financially sound companies with durable growth may be in a position to weather the storm.  

Recession: Signal or Noise? 

The Fed is dealing with tight labor markets and stubborn inflation. Some investors worry that this might invite more aggressive actions from the Fed, which could lead us into recession. But potential buffers against an economic slowdown remain in place - including abundant personal wealth, high labor demand and strong spending power. 

Our Goldman Sachs Global Investment Research colleagues are still forecasting US growth of 2.6% in 2022. 

This article is for informational purposes only and shall not constitute an offer, solicitation, or recommendation to buy or sell securities, or of an account type, securities transaction, or investment strategy. This article was prepared by and approved by Marcus by Goldman Sachs®, but is not a description of any of the products or services offered by and does not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Goldman Sachs Bank USA and Goldman Sachs & Co. LLC are not providing any financial, economic, legal, accounting, tax or other recommendation in this article and it is not a substitute for individualized professional advice. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.  Information contained in this article does not constitute the provision of investment advice by Goldman Sachs Bank USA, Goldman Sachs & Co. LLC are or any of their affiliates, none of which are a fiduciary with respect to any person or plan by reason of providing the material or content herein. Neither Goldman Sachs Bank USA, Goldman Sachs & Co. LLC nor any of their affiliates makes any representations or warranties, express or implied, as to the accuracy or completeness of the statements or any information contained in this document and any liability therefore is expressly disclaimed.