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November 2021

MARKET PULSE | November 2021

Macro Views


There remains risk of another COVID-19 wave, particularly considering the mutation of Delta to Delta-plus. However, global economic restrictions have eased with each successive surge as medical knowledge and vaccines have proliferated. We estimate the total drag from current virus restrictions to be ~2.25% of global GDP, down from a peak of 20% in April 2020. In the absence of a vaccine-evading variant, we expect reopening and recovery to continue. Read More


Growth is on track to be above trend in most major economies in 2022, despite diminished base effects and a slowdown in consumption. In China, we expect property sector uncertainty and regulatory tightening will bring 2022 growth down to 4.8%, but the drag should not significantly spread globally. We forecast 4.5% global growth in 2022. Read More


Inflation has been stickier than initially expected, but we see a path to normalization going forward. Supply-constrained goods account for 80% percent of the 2021 overshoot, largely due to supply chain disruptions. While difficult to resolve quickly, we expect a smoothing in both supply and demand. Sufficient slack in the labor market, along with the removal of pandemic-induced policies, should outweigh wage growth. We expect US core PCE to moderate to 2.3% by 2022YE. Read More


Though stagflation concerns have emerged, we do not think present conditions fit the bill. We expect slowing but not slow growth, declining unemployment, and decelerating inflation ahead. Moreover, compared to previous periods, major central banks have greater credibility at driving full employment and price stability. Read More

Market Views

US Earnings

Despite decelerating earnings growth, Q3 earnings have fared better-than-expected with ~60% of reported companies outpacing consensus EPS estimates. Profit margins have been sustained, though cost pressures are elevated and the duration of supply chain tightness is uncertain. Low inventories and pricing power have enabled corporations to pass on costs to consumers amid a surge in demand. Read More

EM Equities

A significant improvement in the relative EM-DM growth gap, driven by economic normalization in DM economies, may become a medium-term tailwind for EM. Against a backdrop of a subsiding COVID-19 wave and our expectation for a weakening US dollar, domestic reflation may further support EPS growth of 6.8% in 2022. Read More


Depleted supply and low inventory levels have made the energy complex more vulnerable to incremental demand shocks. With colder months ahead, we believe the too-large-to-absorb demand for gas may spillover to oil and amplify risks for higher physical prices. Read More


Markets have continued to re-price accelerated timelines for DM liftoffs, with 1.5 US rate hikes projected by September 2022. Given continued above-target inflation, we now expect the first Fed hike in July 2022, after tapering concludes. Still, substantial surprises on the virus, GDP, inflation, or the labor market could prompt another policy shift. Read More


Strong liquidity, healthy balance sheets, and a distant maturity wall should keep credit attractive. As the cycle matures, record tight spreads and less supportive macro conditions may become near-term constraints. Still, we continue to see favorable carry potential into 2022. Read More

Investing in the Post-Pandemic Cycle

Today’s market cycle is starting from a position of record low interest rates, elevated valuation, and high margins – implying a potential “fat and flat” market profile going forward, with lower longer-term returns and higher levels of volatility. We expect the global equity opportunity set to broaden, and see potential for non-US markets to narrow the gap in earnings and returns. However, opportunities will likely be increasingly alpha-oriented. In our view, areas of particular interest include digitization,
de-carbonization, and innovation.

Investing in the Post-Pandemic Cycle


The global opportunity set flattening may best be illustrated in our expectations for Europe going forward. The differences in earnings growth should be less extreme than in the past decade as market composition is becoming more favorable globally. In particular, technological disruptions and innovation have advanced across markets in recent years. Meanwhile, even on a sector-adjusted basis, recent valuation spreads imply potential for earnings catch-up and valuation convergence.

Source: FactSet, I/B/E/S, Standard and Poor's, STOXX, Goldman Sachs Global Investment Research

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