Investors have faced significant headwinds in the first half of 2023, including rising rates, inflation, the possibility of recession and banking volatility. As we look towards the second half of the year, experts from Goldman Sachs share their global market and investment outlook perspectives.

Jan Hatzius, chief economist and head of global investment research at US-based investment bank Goldman Sachs, played down the risk of a recession in the US at a webinar this week.

“We are more optimistic as the economy has been quite resilient. Lay offs are still very low and there has been an impressive rebound in real disposable income growth. We are also seeing less of a drag on growth from the monetary policy tightening and rate hikes,” Hatzius said.

“Economic growth is unspectacular but it's still expected to be around 1.5 to 2 per cent this year, above recession levels. Headline inflation is down from 9 per cent to 3 per cent and core inflation is 5 per cent. We are also encouraged by the impact on inflation of other countries that tightened before us, such as Brazil, which bodes well for us,” he said.  

He is optimistic about Europe’s economy, saying inflation should be brought down without a recession, with GDP growth of 0.5 per cent. China should see reasonable growth this year, he added, but he sees headwinds for China’s long-term growth.

Asset allocation
Sharmin Mossavar-Rahmani, head of the investment strategy group and chief investment officer of wealth management, responsible for the overall strategic asset allocation and tactical investment strategy, also believes that the possibility of a recession is less likely. “We advised investors to stay invested at the start of 2023 and we are still comfortable with this recommendation. We are overweight in US assets and underweight in emerging markets,” she said. Mossavar-Rahmani believes that the headwinds facing China are getting stronger. “Indian equities also lagged behind those of the US,” she added.

Julian Salisbury, chief investment officer of asset and wealth management, favours investment grade credit and sees some opportunities in equities. He also highlighted the powerful role alternatives can play in a diversified portfolio. “We’re not bearish. We do see growth. We’ve been good for clients, as they stayed invested this year,” Tucker York, global head of Goldman Sachs wealth management, added.

Artificial intelligence
Switching to the economic effects of AI on the wealth management industry, Hatzius believes it could be sizeable, not because it will replace truly creative work, but it could replace less creative work like form filling. “We could see replacement of 25 per cent of work tasks over 10 to 15 years. It will enhance labour productivity growth,” he said. “It’s still a long way off from having any meaningful impact and there’s plenty of open questions but it’s a very exciting area.”