Sharmin Mossavar-Rahmani, chief investment officer of wealth management at Goldman Sachs, has been bullish on the U.S. for more than two decades, and bearish on China since 2013. Those calls look even better today, given the diminishing likelihood of a U.S. recession even as China’s growth sags and its financial troubles grow.
Another 25-basis-point tightening in interest rates would surprise the markets. [A basis point is a hundredth of a percentage point.] Would the Federal Reserve lift rates another one or two times because of stronger growth or stickier inflation? That would increase the odds of a recession later in 2024. There is more likelihood that the Fed will cut rates toward the latter half of [next] year.
When you think about the three pillars [of growth], exports will be a big focus. Property is steadily declining, and the country has too much infrastructure. China is repeating the mistakes of Japan in terms of roads to nowhere, and those of the former Soviet Union by trying to win allies that are generally much weaker. Also, China is increasing its military expenditures.
Newsletter Sign-up Does this bolster your view of U.S. pre-eminence, even though U.S. stocks have done well this year? What is the outlook for U.S. profits, given inflationary pressures and the reshuffling of supply chains?