Market Pulse September 2023

September 26, 2023

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We are excited to share insights from the Wealth Management Investment Strategy Group (ISG).

If you’re wondering where the US economy may be heading, here is a summary of things to know from ISG:

Spending remains strong

Economic activity in the US continues to be remarkably resilient. Consumer spending has been especially strong, with the latest retail sales and personal spending data beating consensus expectations.

Housing is looking livelier

The interest-rate-sensitive housing sector is showing signs of picking back up, reflected in a rise in new home construction and home prices.

But what about inflation?

Notwithstanding this strength in the economy, the labor market has begun to cool off, although gradually. Inflation pressures are also easing slowly.

The Fed may – or may not – be done for the year

With demand and supply coming into better balance, ISG’s base case for the rest of the year is for no further Fed rate hikes. That said, the road ahead remains uncertain, not least because inflation pressures could flare up again if economic activity remains resilient.

As a result, central bank policy decisions, including those of the Fed, are likely to remain more data dependent. As Chair Powell said in a recent speech, “We are navigating by the stars under cloudy skies.” If consumption growth doesn’t cool as expected or labor market tightness stops easing, the Fed may feel it needs to respond with more hikes.

What’s on the radar screen this month? Focus is on a potential US government shutdown in early October if Congress fails to pass a temporary funding measure. However, the economic and market impact of prior shutdowns was small.

This memo and the views within are based on the Wealth Management Investment Strategy Group’s September Macro Monitor publication – a publication focused on the teams’ global macroeconomic views.

The Investment Strategy Group (“ISG”), part of the Asset & Wealth Management business (“AWM”) of GS., focuses on asset allocation strategy formation and market analysis for GS Wealth Management. Any information that references ISG, including their model portfolios, represents the views of ISG, is not financial research and is not a product of GS Global Investment Research and may vary significantly from views expressed by individual portfolio management teams within AWM, or other groups at GS.

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