How growth, inflation and monetary policy affect global markets.
Goldman Sachs expects high-tech industries to contribute about 2 percentage points a year to China's real GDP growth in 2026–2030, but the same amount of spending generates less employment and labor income than in real estate and services.
Goldman Sachs’ current activity indicator as of October rose by 0.1 percentage points from September, and its third-quarter GDP forecast calls for annualized quarter-on-quarter growth of 3.3%; meanwhile, the economic surprise index fell and financial conditions tightened slightly.
The result of Brazil’s presidential runoff went against bets in prediction markets. Citi closed the Brazilian risk positions it had previously increased and removed its overweight in Brazilian equities from its global asset allocation; the bank believes crowded long positions ahead of the election could push asset prices below fair value.
Nomura believes industrial profit growth rose markedly in September from August, mainly driven by higher industrial producer prices. Profit margins improved but remained below the second-quarter average.
Goldman Sachs believes tariffs, the energy shock and mismeasurement of AI prices together explain the current core inflation overshoot. Its baseline calls for two rate hikes, followed by cuts to 3.25%–3.5%.
Goldman Sachs expects AI-related factors to raise the average year-over-year core inflation rate in developed economies outside the United States by about 0.25 percentage points by the first quarter of 2027. The pressure comes mainly from memory costs passing through to consumer electronics and is expected to ease in the second half of 2027.
Fiscal easing and the AI boom have offset some of the impact of tariffs and the Middle East war, but Goldman Sachs believes renewed energy price increases, higher long-term interest rates and weakening AI-driven growth are putting downward pressure on global growth in 2027.
Clients interviewed were generally bullish on US technology stocks and inclined to expect appreciation of the renminbi and Korean won. Nomura is more wary of the impact of a US equity pullback on USD/JPY and the won, and believes the renminbi could appreciate faster than implied by forward rates.
JPMorgan believes investment signals from AI financing are supporting US equities. The repricing of Brazilian assets remains confined to the local market for now, but crowded positions could transmit the shock to other markets through risk-management mechanisms. The Federal Reserve meeting and developments in the Middle East will also influence markets.
Rebounding energy prices and rising long-term interest rates are adding to growth pressures, but Goldman Sachs believes central banks will ultimately raise rates by less than markets have priced in. Earnings, positioning and valuations may still support equities at year-end. The bank maintains a modest tilt toward risk while using the yen and targeted energy exposure to address shocks.
Goldman Sachs expects the Federal Reserve and the European Central Bank to pause rate hikes this week and raise rates again in December. US household demand for equities will remain robust in 2027, but depends on employment, wealth, and competition from cash and bond yields.
Goldman Sachs expects the Federal Reserve to raise rates at every other meeting, completing the second and final hike of this cycle in December. Markets still price in roughly four hikes in total; the disagreement centers on whether tariff, energy and AI-related price pressures can ease in 2027.
Recent cross-asset performance most closely resembles concerns over French public finances, but worries about AI financing are growing. Citi has added a USD/JPY volatility hedge and gone long UK and Spanish government bonds relative to French bonds; despite elevated credit stress, sector concentration keeps it preferring equities over credit.
Citi interprets falling stock prices, widening credit spreads and declining Treasury yields as signs that markets are assigning a higher probability to a slowdown in AI spending. The bank still expects a rate hike in December, but the buffers provided by consumption and housing are weakening, and further stock market declines could change the policy direction.
Real GDP grew 4.5% year over year in the third quarter, and the full-year growth target looks achievable. But fiscal spending fell in the first nine months, prompting Goldman Sachs to lower its full-year augmented fiscal deficit forecast; the bank also expects the central bank to switch its policy rate benchmark next year.
Goldman Sachs has raised its estimate of the direct drag from real estate on real GDP growth in 2026 from 1.5 percentage points to 1.8 percentage points, but expects it to narrow to 1.3 percentage points in 2027. The key is the property sector’s declining share of the economy; diverging home prices, shrinking household wealth and lost local land revenues will determine how long the adjustment lasts.
Nomura expects the USD/CNY fixing to be 471 points lower than the previous fixing, but only 2 points below the previous official spot close; including the countercyclical factor, the forecast is 6.6910, down 270 points from the previous fixing.
German expansion and the final phase of the recovery fund support growth in 2026, but Goldman Sachs expects the net fiscal contribution to growth to fall to zero in 2027 and turn into a drag from 2028. Rising interest costs, election-related risks of higher deficits and negotiations on a new EU budget together constrain future fiscal space.
A decline in risk assets supported US Treasuries, but BofA still expects a Federal Reserve rate hike. French government bonds lack new buyers, while the ECB faces pressure to reassure markets. Australian and Japanese rates trades depend on how much tightening is already priced in.
US stocks fell as Treasury yields declined. BofA believes markets are worried about whether AI investment can be converted into profits. Risk aversion raises the bar for a Federal Reserve rate hike in October, but the energy shock and underlying inflation still support further tightening; the European Central Bank is more likely to wait, while the Bank of England faces more immediate pressure to act.
