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September 2022

MARKET PULSE | September 2022

Macro Views


US GDP growth is now below-potential, a necessary shift to tame inflation. Consumer credit draws have increased, with 233mn new accounts opened in 2Q, the most of any quarter since 2008. Still, we think systemic risks are absent, with just 2.7% of total consumer loan balances delinquent by over 30 days, well below the average of 6.1%. Read More


The US labor market slowdown is underway as companies re-evaluate hiring, though job growth still runs at twice the pre-pandemic rate. We expect labor participation to remain steady through 2022YE, suggesting that an additional reduction in job openings is required to rebalance the labor market. GIR estimates that the current gap between total jobs and workers is 5.6mn, still about 3.6mn above levels needed to keep wage growth compatible with the Fed’s inflation target. Read More


We believe near-term risks of unexpected military escalation in the Taiwan Strait are limited as China focuses internally ahead of the National People’s Congress. In Europe, Italy has a general election later this month following PM Draghi’s resignation. Uncertainty is likely to remain elevated as any potential strain on EU uniformity may hinder its ability to deploy fiscal support and address other risks. Read More

US Policy

President Biden signed the Inflation Reduction Act into law, capping off a year’s worth of negotiations. GIR estimates the net fiscal drag on GDP to be less than –0.1% in each of the next few years, with corporate tax increases and cost savings offsetting energy investments. We expect this law to tighten an increasingly close suite of Congressional races ahead of US midterm elections. Read More

Market Views


We revised 2023 S&P 500 EPS growth forecast down 3pp to 3% to reflect slowing growth, new corporate taxes, and potential margin contraction. Though returns may be moderating, we still see opportunities in US equities. The S&P 500 has regained half of its decline from its peak to June trough, with history showing that in the 12 months after past retracements, the index has delivered a 19% return on average. Read More

Fixed Income

The Fed’s data-dependent guidance will likely skew US Treasury yields higher, and US growth deceleration may keep the yield curve flat. While the degree of rate risk has moderated since 1H 2022, we continue to believe in maintaining short duration exposure given its rich income potential. For credit, we prefer staying up in quality as further spread widening between IG and HY may continue, most notably for European debt where the spread ratio remains near post-GFC lows. Read More


Technicals are likely to act as modest headwinds as seasonal summer redemptions end. However, we expect net supply to remain below consensus expectations, outflows to continue abating, and a strong upgrade cycle to persist on the back of strong municipal credit. Read More


We revised 2022YE Brent crude forecast down to $125/bbl given faster-than-expected US SPR releases and higher-than-expected Russian oil supplies. However, a large oil deficit is likely to still persist, and limited Russian gas supplies may increase gas-to-oil substitution, informing our view that oil prices may rebuild. Read More

Beyond Core

Strategic portfolios are designed to weather all storms, but traditionally core assets have thrived most under predictable and stable dynamics. This year’s macro environment has been far from that, requiring portfolios to navigate 1970s-like conditions of weakening growth and still-elevated inflation. In this market, we believe seeking out alternatives that can zig when the rest of the portfolio zags is key to help offset the highly-correlated performances in today’s core equities and bonds.

Market Pulse September 2022


For instance, equity contractions during past bear markets have usually been accompanied by fixed income boons, making bonds a diversifier for S&P 500 returns. This year, significant re-pricing has occurred alongside a complex macro setting, creating a headwind for all core assets. With volatility likely to persist until growth sentiment improves, investor portfolios are in need of assets with a low beta to equities.

Source: Bloomberg and Goldman Sachs Asset Management.

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