Menu Our services in the selected location:
  • No services available for your region.
Select Location:
Remember my selection
Your browser is out of date.

Fixed Income Outlook 1Q 2022

Goldilocks & The Three Bulls or Bears?

Faced with a complex macro backdrop, central banks will be seeking to deliver “goldilocks” policy normalization to keep inflation in check and neither too hot nor too cold. The temperature of financial markets will depend on the balance between bearish and bullish factors. The bearish developments include an unwind of easy macro policies, high inflation and virus uncertainty. These factors are somewhat counterbalanced by positive economic and corporate earnings growth alongside healthy private sector balance sheets. The final bullish investment signal is structural in nature: an acceleration in private sector efforts to advance the climate transition which gives rise to long-term investment opportunities.

The global economy is also adapting to a new environment in China. Starting in 2020 with swift virus control, China entered its own macro orbit. Through 2021, while policy in advanced economies remained easy, Chinese policymakers normalized macro policies and tightened regulations in several sectors, most notably in the property sector. Overall, China is settling into a new regime where policymakers tolerate slower growth in the near term for a more resilient economy in the long run.

CIO Perspectives

Samuel Finkelstein

Chief Investment Officer, Fixed Income and Liquidity Solutions

Samuel Finkelstein


“We expect fine-tuning of policy settings to continue in 2022, stabilizing the China property sector, and in turn, supporting the Asia high yield market. We also believe 2021 reaffirmed the case for Chinese government bonds (CGBs), with yields insulated from coordinated moves in global yields. Attractive yields in a global context, diversification benefits and a tailwind from index inclusion support continued exposure to CGBs.”

Ashish Shah

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

Ashish Shah


"Macro and corporate conditions are consistent with an early- to mid-cycle environment, however, an unwind of global liquidity and extended valuations creates a more challenging investment environment relative to the past two years. As a result, we are inclined to gravitate towards our strategic asset allocation model, with a preference for securitized credit, high yield corporate bonds and floating-rate assets such as bank loans."

Macro at a Glance

An in ease in transitory inflation drivers may give way to underlying price pressures

A demand rotation from goods to services (see chart) should allow supply bottlenecks to ease and there are tentative signs of moderating cost-push inflation. But even as so-called “transitory” drivers ease, inflation may remain underpinned by “underlying” price pressures such as firm inflation expectations and wage growth.


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

Policy Picture

Rate lift-off and QE unwind will take hold

Policy rates in G10 economies have generally moved lower since mid-2019 but that is set to change in 2022 (see chart). At the same time, there will be a sizeable reduction in central bank bond buying as the Fed, ECB and BoE scale back purchases or the size of their balance sheet holdings.


Source: Bloomberg, Goldman Sachs Asset Management. As of January 6, 2022.  Central bank abbreviations: Bank of England (BoE), Bank of Japan (BoJ), European Central Bank (ECB), Reserve Bank of New Zealand (RBNZ), Bank of Canada (BoC).

What to Watch

The supply side of the economy

There are tentative signs of moderating cost-push inflation. For example, our Index of Global Supply Cost Pressures (see chart) eased month over month in recent readings.


Source: Macrobond, Goldman Sachs Asset Management. As of January 1, 2022. Our Index is based on more than a dozen indicators of global cost-push pressures including key commodity prices, supply-side components of PMI indices and inventory data.

Sustainability Spotlight

From Greenflation to Carbonomics  Low-carbon technologies are not yet fully incentivized due to the limited reach of global decarbonization policies and carbon pricing. We believe revenue-neutral carbon pricing is an efficient way to advance the climate transition.  At the same time, policy uncertainty is constraining capital allocation to hydrocarbons and high-carbon sectors, such as shipping. The result is underinvestment in key parts of the economy. The energy supply-demand mismatch is further compounded by the climate transition as the development of many clean technologies boosts demand for “old economy” commodities. 


From a macro perspective, this two-speed decarbonization effort suggests that commodities and high-carbon sectors may be an ongoing source of cost inflation—or “greenflation”—and inflation volatility for several years, before low-carbon technologies gain scale and become more economical.  Over the longer term, as “carbonomics” is realized, a reduced cost of low carbon activities and clean energy sources could be deflationary force, particularly if green technologies continue to benefit from economies of scale and innovation.


Advancing the climate transition  As a firm focused on climate transition, we see an opportunity for engagement and collaboration with clients on custom investment solutions that leverage our environmental, social and governance (ESG) analytics such as data on physical climate risks¹, transition climate risks and sector-level ESG templates. 



1 Our ESG framework was the first in the industry to leverage a dataset (produced by Four Twenty Seven) that matches physical climate risk exposure to the distribution of population, agricultural production and overall GDP creation within countries.


Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Goldman Sachs Asset Management to buy, sell, or hold any security. Views and opinions are current as of the date of this presentation and may be subject to change, they should not be construed as investment advice.

Investment grade refers to the quality of a company's credit and to be considered investment grade issue, a company must be rated at 'BBB' or higher. Anything below this 'BBB' rating is considered non-investment grade or high yield.

This material is provided at your request for informational purposes only. It is not an offer or solicitation to buy or sell any securities.


Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant.

This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by Goldman Sachs Asset Management and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and Goldman Sachs Asset Management has no obligation to provide any updates or changes.

United Kingdom: In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority.

European Economic Area (EEA): This material is a financial promotion disseminated by Goldman Sachs Bank Europe SE, including through its authorised branches ("GSBE"). GSBE is a credit institution incorporated in Germany and, within the Single Supervisory Mechanism established between those Member States of the European Union whose official currency is the Euro, subject to direct prudential supervision by the European Central Bank and in other respects supervised by German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufischt, BaFin) and Deutsche Bundesbank.
Switzerland: For Qualified Investor use only - Not for distribution to general public. This is marketing material. This document is provided to you by Goldman Sachs Bank AG, Zürich. Any future contractual relationships will be entered into with affiliates of Goldman Sachs Bank AG, which are domiciled outside of Switzerland. We would like to remind you that foreign (Non-Swiss) legal and regulatory systems may not provide the same level of protection in relation to client confidentiality and data protection as offered to you by Swiss law.

Asia Pacific: Please note that neither Goldman Sachs Asset Management International nor any other entities involved in the Goldman Sachs Asset Management (GSAM) business maintain any licenses, authorizations or registrations in Asia (other than Japan), except that it conducts businesses (subject to applicable local regulations) in and from the following jurisdictions: Hong Kong, Singapore and Malaysia. This material has been issued for use in or from Hong Kong by Goldman Sachs Asset Management (Hong Kong) Limited, in or from Singapore by Goldman Sachs Asset Management (Singapore) Pte. Ltd. (Company Number: 201329851H) and in or from Malaysia by Goldman Sachs (Malaysia) Sdn Berhad (880767W).

Australia: This material is distributed by Goldman Sachs Asset Management Australia Pty Ltd ABN 41 006 09 9 681, AFSL 2 28948 (‘GSAMA’) and is intended for viewing only by wholesale clients for the purposes of section 761G of the Corporations Act 2001 (Cth). This document may not be distributed to retail clients in Australia (as that term is defined in the Corporations Act 2001 (Cth)) or to the general public. This document may not be reproduced or distributed to any person without the prior consent of GSAMA. To the extent that this document contains any statement which may be considered to be financial product advice in Australia under the Corporations Act 2001 (Cth), that advice is intended to be given to the intended recipient of this document only, being a wholesale client for the purposes of the Corporations Act 2001 (Cth). Any advice provided in this document is provided by either Goldman Sachs Asset Management International (GSAMI), Goldman Sachs International (GSI), Goldman Sachs Asset Management, LP (GSAMLP) or Goldman Sachs & Co. LLC (GSCo). Both GSCo and GSAMLP are regulated by the US Securities and Exchange Commission under US laws, which differ from Australian laws. Both GSI and GSAMI are regulated by the Financial Conduct Authority and GSI is authorized by the Prudential Regulation Authority under UK laws, which differ from Australian laws. GSI, GSAMI, GSCo, and GSAMLP are all exempt from the requirement to hold an Australian financial services licence under the Corporations Act of Australia and therefore do not hold any Australian Financial Services Licences. Any financial services given to any person by GSI, GSAMI, GSCo or GSAMLP by distributing this document in Australia are provided to such persons pursuant to ASIC Class Orders 03/1099 and 03/1100. No offer to acquire any interest in a fund or a financial product is being made to you in this document. If the interests or financial products do become available in the future, the offer may be arranged by GSAMA in accordance with section 911A(2)(b) of the Corporations Act. GSAMA holds Australian Financial Services Licence No. 228948. Any offer will only be made in circumstances where disclosure is not required under Part 6D.2 of the Corporations Act or a product disclosure statement is not required to be given under Part 7.9 of the Corporations Act (as relevant).
Canada: This presentation has been communicated in Canada by GSAM LP, which is registered as a portfolio manager under securities legislation in all provinces of Canada and as a commodity trading manager under the commodity futures legislation of Ontario and as a derivatives adviser under the derivatives legislation of Quebec. GSAM LP is not registered to provide investment advisory or portfolio management services in respect of exchange-traded futures or options contracts in Manitoba and is not offering to provide such investment advisory or portfolio management services in Manitoba by delivery of this material.
Japan: This material has been issued or approved in Japan for the use of professional investors defined in Article 2 paragraph (31) of the Financial Instruments and Exchange Law by Goldman Sachs Asset Management Co., Ltd.


No part of this material may, without Goldman Sachs Asset Management’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient.

Date of first use: January 12, 2022.   264051-OTU-1534800

Please enter your email address to continue reading.

Confirm Your Access

An email has been sent to you to verify ownership of your email address.

Please verify the link in the email by clicking the confirmation button. Once completed, you will gain instant access to our insights.

If you did not receive the email from us please check your spam folder or try again.