Brian Friedman

What the Fed’s Hawkish Pivot Means for Economic Growth and Markets

David Mericle, Brian Friedman, Alison Nathan

Goldman Sachs has revised its 2022 Federal Reserve interest rate hike forecast to seven increases driven by wage growth incompatible with inflation targets, projecting balance sheet reductions to begin in June. While financial conditions remain tighter with record credit outflows and equity exposure hitting yearly lows, the firm attributes greater recessionary risk to the fading of pandemic-era fiscal stimulus than to monetary policy. Consequently, the research recommends a long-equity, short-credit strategy and identifies emerging market currencies as attractive assets amid a global divergence where developing central banks have largely finished tightening.