November is here, and with it comes the beginning of the holiday season. While the first frost signals the arrival of winter, the halls of every large investment bank are packed with pages and pages of “outlook” research. This research marks the end of this year’s economic story and the beginning of what’s to come next year.
Investors will most likely experience a sense of déjà vu when thumbing through the many economic outlooks. Researchers often make a big fuss about the small differences among their growth and inflation forecasts as compared to the “consensus” of their peers. However, this year’s outlooks came with a fair amount of variety. For example, Goldman Sachs predicts robust growth in America at 2.1%, which is double what other economists at UBS foresee. Additionally, views on inflation ranged from a prediction of a 50% drop in 2024 to expectations of inflation remaining high at around 3%.
The scenarios and predictions for the Fed’s future interest rate policies also vary significantly. While Goldman believes that both growth and inflation will remain hot, UBS predicts a sharp slowdown in both. Bank of America expects comparative stagflation, while Morgan Stanley envisions a version of the “immaculate disinflation” world.
However, this level of uncertainty is not surprising given the unexpected hotness of inflation, the speed of required rate rises, and the resilience of the economy. The result is a wide range of analogies, with some economists predicting a return to the 1970s, while others expect a “’90s redux”. Jan Hatzius of Goldman believes that comparisons with decades past are “too simple” and may lead investors astray.
Despite the differences in these predictions, there is a common thread—the belief that the worst is over. Many economists seem to think that the economy is poised to resolve itself in 2024, and that the difficulty of forecasting will also improve. Perhaps in 2025 there will be a return to consensus once more.
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