- Goldman Sachs thinks the consensus view on Wall Street is too bearish about economic growth in 2024.
- Goldman sees no recession this year and estimates 2024 GDP growth to be double the consensus.
- Here's why Goldman isn't concerned about the worries plaguing Wall Street strategists.
Wall Street is increasingly concerned about a slowdown in economic growth and a potential recession in 2024, but not Goldman Sachs.
The investment bank's top economists said in a note over the weekend that the top risks facing the US economy this year are of little to no concern to them.
"We expect much stronger GDP growth in 2024 than consensus and see a much lower risk of recession," Goldman economists David Mericle and Manuel Abecasis said in the note.
Goldman expects US GDP growth of 2.0% in 2024, which is about double consensus estimates of just under 1%, and sees a 20% chance of a recession materializing, which is far below consensus estimates of 50% probability of a recession this year.
"What are other forecasters worried about that we aren't?" Goldman economists asked. Much of the risks have to do with the strength of the consumer, the health of the jobs market, and commercial real estate, according to the note.
These are the top risks Goldman highlighted, and why they aren't too concerned about them in 2024.
1. A consumer slowdown
While some expect consumers to slow their spending habits due to a decline in excess savings, Goldman said that real income increases and strong household balance sheets bode well for continued consumer strength.
"Current spending patterns do not appear unsustainable and the saving rate does not look puzzlingly low at a time when household wealth is very high," Goldman said.
The bank said the recent uptick in consumer delinquency and default rates "mostly reflect normalization" from the very low levels seen in the aftermath of the pandemic.
2. A slowdown in the jobs market
Job openings are still high, and the layoff rate is still very low, so the labor market should see continued resilience throughout 2024, according to Goldman.
"While a few recent data points have been weaker, more statistically reliable signals such as trend payroll growth and our composite job growth tracker remain strong," Goldman said.
3. The commercial real estate market
The health of the commercial real estate market rang alarm bells in 2023 as interest rates soared while occupancy rates were still well below pre-pandemic levels. But Goldman said that the office real estate market is too small to have a big impact on the broader economy.
"Commercial real estate broadly is not a problem, office specifically is. But office loans account for only 2% to 3% of banks' loan portfolios, small enough for banks to manage the hit," Goldman said.
All-in, Goldman is much more bullish on the broader economy than consensus, and that should bode well for the stock market.
The bank has a year-end S&P 500 price target of 5,100, representing potential upside of 7% from current levels.