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June 2021

MARKET PULSE | June 2021

Macro Views


Global case growth has turned down, but remained elevated in India and pockets of Latin America. With improving vaccine distribution and virus containment, we expect that 60-70% of EM populations will have some immunity by year-end. In the US and Europe, we expect 50% of the population to be vaccinated by June, with reduced demand the main constraint thereafter. Read More

US Labor

Unemployment, wage, and payroll measures have been distorted through the pandemic, and we would caution extrapolating long-term trends from current noise. The confluence of rapid reopening, generous unemployment benefits, and lingering virus-related impediments have created imbalances that we think will be temporary and abate by fall. Ultimately, we expect headline unemployment to fall to 4.2% by YE and for wage growth to normalize near 3%. Read More

US Inflation

Prices have surged in categories related to reopening and in those facing supply disruptions, while remaining relatively tame in core categories. As the effects of the former roll off, the US is likely past peak inflation for this year and we expect will trend down to 2.25% core PCE by YE. Still, upside risks include persistent wage growth, an extended boom in home prices, or increased inflation expectations that could have more lasting impact. Read More


Robust fiscal policy and an emphasis on social responsibility has made more aggressive tax policy possible globally. In the US, we think Congress may pass a 25% corporate rate, revert the top marginal household rate to 39.6%, and raise the capital gains rate to 28% for top earners. In Europe, access to the Recovery Fund is linked to more tax collection in some countries, the Green party in Germany has been campaigning for higher corporate taxes to pay for green investments, and the UK plans to raise the corporate rate to 25% in 2023. Read More

Market Views


Following months of stretched investor sentiment, equity positioning indicators have finally moderated (48th percentile) from peak levels, suggesting better risk-return symmetry ahead. Periods of extreme positioning in the past have increased correction risks, so this reversion may be welcomed. Read More

US Equities

The global reopening, elevated consumer spending, and strong operating leverage are expected to drive stronger earnings. We have therefore revised our S&P 500 EPS estimates higher to $193 in 2021 and $202 in 2022, although the impact of corporate tax reform on earnings remains uncertain. Read More


While munis screen expensive, we believe strong fundamentals from improving tax receipts and supportive technicals from summer redemptions justify current ratios. Potential tax changes may also drive higher demand. Still, muni investing requires a dynamic approach to tactically position for shifting conditions in credit, term and covenant structures, and market segmentation. Read More

Real Assets

In a reflationary backdrop with rising taxes, normalizing rates, and reduced hedging efficacy of traditional bonds, real estate may address many challenges by providing: 1) inflation-linked revenue streams, 2) asset appreciation under tight supply, 3) high cap rates, and 4) lower tax burden via pass-through structure. Read More


A 300% Bitcoin rally has been met with extreme volatility (67%) over the past year, reflecting ~3x and 14x the risk of US equities and fixed income, respectively. Though the technology may be transformative, high volatility makes it difficult to deploy in risk-aware portfolios. Read More

Tax Charge

US tax rates are likely to rise for top earners, though the final outcome may be more moderate relative to the Biden administration’s proposal. While higher tax rates are a sticker shock to investors, we think the investment opportunity set still looks robust. The market impact from higher taxes has historically been temporary, and investors with long-time horizons still gain more from deferring taxes due to the power of compounding. That said, we believe strategically deploying tax-efficient strategies may help investors keep more returns in their pockets.

Taxes now or later depends on your time horizon

For investors contemplating whether to realize capital gains now versus later, we believe the decision rests on two factors – an investor’s return expectation and investment horizon. A breakeven analysis tells us that an investor expecting a 6% annualized US equity return may potentially benefit from delaying a tax event if his investment duration exceeds 3.8 years. The potential benefit of compounding returns on a larger capital base may outweigh the higher tax cost over longer time frames

Source: Goldman Sachs Investment Strategy Group and Goldman Sachs Asset Management

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