Joshua Schiffrin, Global Trading Strategy Director at Goldman Sachs Group Inc., pointed out in the latest report that the Federal Reserve will start cutting interest rates in March and will cut rates four times this year, with inflation reaching the Fed's target of 2%.
The trading director who accurately predicted a soft landing for the US economy last year predicts that central banks in Europe and the UK will also follow the example of the Federal Reserve. However, Schiffrin believes in his top ten predictions for 2024 that the Bank of Japan will go against the trend and raise interest rates in April.
Although risk assets are expected to generally rise this year, Schiffrin warns that the first half of the year will be difficult as market bets on the timing and pace of the Federal Reserve's interest rate cuts continue to fluctuate. He suggested that investors look for opportunities in emerging markets such as Türkiye and buy against the trend after China's benchmark stock index hit its low point since the epidemic.
Schiffrin wrote in a report to clients, "The first half of 2024 will be a different year from the past four years, with significant market fluctuations and no major trends. The central bank's loose policy will dominate the storyline, but considering the degree of pricing, it may be difficult to trade."
Due to a series of better than expected economic data, bond traders have lowered their expectations for interest rate cuts. In December last year, the Federal Reserve's interest rate cut in March was seen as a certainty. Now, the probability has decreased to around 40%.
On the other hand, Schiffrin also stated that geopolitical tensions leading to the interruption of Red Sea shipping are unlikely to prevent the overall downward trend of price pressure. He said that looking ahead, once the 2% target is achieved, the Federal Reserve may adjust next year's inflation target to the range of 1.5% to 2.5%.
Federal Reserve Chairman Jerome Powell and his colleagues will hold a monetary policy meeting next week, and are expected to maintain interest rates unchanged for the fourth consecutive time.
"I have great faith in the March interest rate cut," Schiffrin said. "I think they realize that starting early has many benefits. If the economy really weakens, they may gradually accelerate the pace of interest rate cuts, which will reduce the possibility of them falling significantly behind the situation. Of course, they can always stop cutting interest rates at a still restrictive level."
Schiffrin joined Goldman Sachs in 2001 and was appointed as a partner in 2012. The fact proves that his soft landing prediction published a year ago was very visionary. At that time, when most investors and economists were concerned about rising inflation and imminent economic recession, he was more optimistic. Ultimately, the US economy is still steadily growing, with the annualized growth rate of the Consumer Price Index (CPI) dropping from 6.4% to 3.4%.