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Fixed Income Outlook 4Q 2021

Business as (Un)usual

Almost 20 months since the onset of the pandemic, economic activity and the investment backdrop is anything but usual. Delta spread, shifting demand dynamics and logistical glitches have elongated and broadened issues on the supply side of the economy. Supply bottlenecks have contributed to growth downgrades and major upside inflation surprises. For now, global activity is expansionary, financial conditions are easy, the growth impulse from fiscal spending is still positive and the private sector is sitting on a mountain of excess savings – a highly unusual seat on the way out of a recession. But the backdrop is shifting. A withdrawal of Covid-era easy policies is raising questions about implications for the economy and financial assets – all the more so given asset valuations are at the higher end of their historical range. Overall, the near term environment has turned more challenging and we have moved to a more cautious investment stance.

CIO Perspectives

Sam Finkelstein

Chief Investment Officer, Fixed Income and Liquidity Solutions

Sam Finkelstein


“A resolution of supply side bottlenecks could change the economic narrative in the coming months but the current macro mix of moderating growth, particularly in China, accelerating inflation and a rollback of easy Covid-era policies creates a challenged investment environment.”

Ashish Shah

Co-Head of Fixed Income and Liquidity Solutions, Goldman Sachs Asset Management

Ashish Shah


"As the global liquidity tide goes out, idiosyncratic risks will go up. From a starting point of high valuations, this outlook favors a moderate allocation to fixed income spread sectors, with greater investment room reserved for security selection."

Macro at a Glance

Supply Chain Issues - Pain in the (Bottle) Neck

Supply bottlenecks have contributed to growth downgrades and major upside inflation surprises.


Source: Goldman Sachs Asset Management, Macrobond. As of September 2021.

Policy Picture

Liquidity Rollback

The flow of global liquidity is positive but slowing down, meaning the delta is turning negative, as major central banks taper or conclude asset purchases.


Source: Goldman Sachs Asset Management, Bloomberg. As of September 20, 2021. October 2021 onwards reflects Goldman Sachs Asset Management forecasts. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved.  Please see additional disclosures at the end of this presentation.

Sustainability Spotlight

Racial economic gaps are stark. Goldman Sachs Investing in Racial Economic Equality and Black Womenomics research highlights racial gaps on many dimensions including earnings, wealth, education, access to capital, housing and health.


Munis have an inherent social link with society. Municipal bonds (“munis”) are debt securities issued by US states, cities, counties, and other governmental entities to fund day-to-day obligations and to finance projects in many of the areas that are critical to closing racial gaps such as education, housing and healthcare.


Driving inclusive growth through the power of transparency. As a firm focused on inclusive growth, we have partnered with industry peers and two minority-owned underwriters to establish The Municipal Issuer Racial Equity & Inclusion Engagement Framework. Through an associated disclosure questionnaire, we are seeking to fill important data gaps on social issues that are critical for environmental, social and governance (ESG) analysis. We also hope to incentivize increased disclosure and engagement on racial equity and inclusion considerations relating to a range of social issues from law enforcement to community development and food security to healthcare.  

Related Insights


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Views are as of Oct 12, 2021.

Date of first use: October 5, 2021.   255039-OTU-1487043

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