Goldman Sachs’ Global Head of Trading Strategy, Joshua Schiffrin, anticipates that the Federal Reserve will initiate interest rate cuts starting in March, totaling four cuts throughout 2024. Furthermore, Schiffrin predicts that inflation will reach the central bank’s 2% target. In his list of 10 predictions for 2024, he envisions European and UK central banks following suit with rate cuts, while the Bank of Japan is expected to deviate from the trend by raising rates in April.
Despite projecting gains in risky assets for the year, Schiffrin cautions that the first half of 2024 may present challenges as markets fluctuate based on speculation about the timing and pace of Fed rate cuts. He advises investors to explore opportunities in emerging markets, highlighting Turkey, and considers Chinese stocks as a contrarian buy, especially after the local benchmark reached pandemic lows.
In a note to clients, Schiffrin suggests that the central banks’ easing policies will dominate market discussions in the first half of the year, creating choppy and range-bound markets with no significant trends. He acknowledges the difficulty in trading given the already priced-in nature of central bank actions.
While bond traders have adjusted their expectations for rate cuts due to positive economic data, Schiffrin maintains confidence in a March rate reduction, emphasizing the potential benefits of an earlier start. He suggests that initiating cuts early allows the Fed to adjust the pace based on economic conditions while minimizing the risk of falling behind the curve.
Schiffrin, known for his accurate soft-landing call for the US economy last year, believes that shipping disruptions in the Red Sea, resulting from geopolitical tensions, won’t hinder the broader downtrend in pricing pressures. He anticipates the Fed modifying its inflation target to a range of 1.5% to 2.5% once the 2% target is achieved.
In summary, Schiffrin’s predictions for 2024 include four rate cuts by the Fed, inflation reaching the 2% target, rate cuts by European and UK central banks, a rate hike by the Bank of Japan, challenging market conditions in the first half, and opportunities in emerging markets and Chinese stocks.
Note: Predictions are subject to market developments and may evolve based on changing economic conditions.
