Will the global economy will outperform again in 2024?

Anti-obesity drug market could hit $100 billion # # --------------------------------------------------------------- The key takeaways today: - The global economy will fare better than expected — again — in 2024 - Forecast change: When will AI impact GDP growth? - Anti-obesity drugs offer a $100 billion opportunity - Decarbonization could have a surprising impact on oil prices - Mortgage rates forecast to stay elevated - Brainteaser: How many young adults lived at home in 2022? Was this newsletter forwarded to you? ([Sign up now.]( --------------------------------------------------------------- The global economy will perform better than expected in 2024 Goldman Sachs Research [expects the global economy to outperform again in 2024](.  That outlook is based on our economists' prediction for income growth (amid cooling inflation and a robust job market), their expectation that rate hikes have already delivered their biggest hits to GDP growth, and their view that manufacturing will recover. Central banks, meanwhile, will have room to reduce interest rates if they're concerned about the economy slowing. “This is an important insurance policy against a recession,” Goldman Sachs Research Chief Economist Jan Hatzius writes in the team's report. Worldwide GDP is forecast to expand 2.6% next year on an annual average basis, compared with the 2.1% consensus forecast of economists surveyed by Bloomberg. In fact, Goldman Sachs Research's forecasts for GDP growth in 2024 are more optimistic than the consensus for eight of the world's nine largest economies, as of Nov. 8, 2023. And notably, our economists expect US growth to outpace its developed market peers again. --------------------------------------------------------------- Forecast change: AI's GDP boost could start in 2027 Goldman Sachs Research forecasts [AI may start having a measurable impact on US GDP in about four years]( and begin affecting growth in other economies shortly after. - The foundation of the forecast is the finding that AI could ultimately automate around 25% of work tasks in advanced economies and 10-20% of tasks in emerging economies, Goldman Sachs Research economists Joseph Briggs and Devesh Kodnani write in the team's report.  - Our economists estimate a growth boost from AI of 0.4 percentage points in the US, 0.3 percentage points on average in other developed markets, and 0.2 percentage points on average in advanced emerging markets by 2034. In other emerging markets, Goldman Sachs Research forecasts a smaller boost from AI, given adoption will probably take longer and AI exposure will likely be lower. - “We expect this automation to drive labor cost savings and free up workers' time, some of which will likely be allocated to new tasks,” Briggs and Kodnani write. The ultimate signifiance of these effects will depend on how capable AI actually becomes and how it's used. --------------------------------------------------------------- The market for anti-obesity drugs could hit $100 billion By 2030, the global market for anti-obesity medications could grow [by more than 16 times to $100 billion, up from $6 billion annualized sales this year, according to Goldman Sachs Research]( Our analysts estimate the weight management market could yield some of the highest-grossing drugs of all time. These new-generation therapies are emerging as obesity rates continue to rise. Based on current trends, more than half the global population will be overweight or obese by 2035, compared with 38% in 2020, according to the World Obesity Atlas 2023.The new class of drugs has achieved weight loss in the mid-20% range for body weight reduction, compared with around 3% to 11% for early generation therapies.  Clinical studies could expand the use of these drugs if they prove effective at reducing medical risks related to obesity, such as cardiovascular disease, cancer, and sleep apnea. The studies “are meant to create, in essence, a wall of evidence to further compel insurance companies into the argument that it makes good pharma-economical sense for them to provide coverage for these anti-obesity medications,” [Chris Shibutani, senior biopharmaceuticals analyst in Goldman Sachs Research, says on Goldman Sachs Exchanges]( Wider insurance coverage — combined with breakthroughs in efficacy and safety relative to earlier generation therapies — already appears to be changing buying behavior. Consumers purchasing medications to counter side effects linked to anti-obesity drugs (diarrhea and nausea) are also reducing their consumption of breakfast foods, weight loss bars, and salad dressing. “This looks to me like a consumer who maybe doesn't have the same appetite in the morning. Skipping a breakfast on occasion. And maybe a consumer who's been trying to already manage their weight by consuming more salads and weight loss bars,” says Goldman Sachs Research's Jason English. This consumer looks like “the early adopter of these drugs,” he adds.  Large-scale adoption of anti-obesity medication could have a significant impact on the food and beverage industries. If adoption in the US reaches around 15 million people, that could erase some 2% to 3% of the population's caloric intake, English says. “We're talking about six- or seven-years' worth of industry growth erased in a scenario such as that.” --------------------------------------------------------------- What decarbonization could mean for oil prices While the rise of renewable energy is expected to cut demand for oil over time, that will not necessarily translate into lower oil prices, according to Daan Struyven, who leads oil research for Goldman Sachs. [Uncertainty about the pace of transition away from oil may play a role in keeping prices high]( “Over the next 20 years, global oil demand is widely expected to slow or fall,” Struyven says. “But the further out you look, the more forecasts diverge.” This lack of clarity presents a challenge for oil companies, which don't want to produce more oil than the world is willing to buy. “Because the demand outlook is so uncertain, companies are delaying their investments in expensive, long-cycle projects,” Struyven says. “As existing projects get depleted, oil supply could drop — and rather than a surplus of oil, we may find ourselves with regular deficits.” The uncertainty could also have a more direct impact on the prices of long-term futures. “Investors may require a premium in long-dated prices to compensate for the increased investment risk from high uncertainty about demand,” Struyven says. These insights lead Struyven to a surprising conclusion: “Even if the world eventually uses less oil, the price of a barrel of oil could remain remarkably robust.” --------------------------------------------------------------- US mortgage rates are forecast to stay above 7% in 2024 Goldman Sachs Research [forecasts US mortgage rates in the coming year to be higher than it previously expected](. Home prices are also projected to increase even as borrowing costs remain elevated. As interest rates have risen, 30-year mortgage rates are now expected to be 7.6% at the end of 2023, up from the previous estimate of 7.1%, Goldman Sachs Research analysts Roger Ashworth and Vinay Viswanathan write in the team's report. Similarly, the forecast for rates at the end of 2024 now stands at 7.1%, up from 6.8% previously. At the end of 2025, rates are predicted to be 6.6%. Meanwhile, homes have appreciated despite the rise in borrowing costs. Prices grew in August by 0.9% month-over-month, reflecting an annualized 11% pace, according to Case-Shiller data. “The continued strength of the data surprised us,” Ashworth and Viswanathan write. Goldman Sachs Research expects home prices, adjusted seasonally and accounting for the full year, to appreciate 2% in 2023, 1.9% in 2024, and 2.8% in 2025. --------------------------------------------------------------- Briefings Brainteaser: Young adults at home The share of young adults (age 18-34) living with their parents in the US fell in 2022, after nearing 34% during the pandemic, its highest level in decades. What share of this cohort was living with their parents last year? A) 8% B) 12% C) 25% D) 31% [Check the answer here.]( --------------------------------------------------------------- Goldman Sachs in the news [CNBC]( November 7 Now is the time to stay invested in equities: Goldman Sachs' Sara Naison-Tarajano (5:55) [CNBC]( November 8 Goldman Sachs' Jan Hatzius discusses the macro outlook for 2024 (4:08) --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. Past performance is not indicative of future performance. To the extent this newsletter includes material from Goldman Sachs Global Banking & Markets, please [click here]( for information relating to Goldman Sachs Global Banking & Markets material and your reliance on it. The Investment Strategy Group, part of the Asset & Wealth Management business (“AWM”) of GS, focuses on asset allocation strategy formation and market analysis for GS Wealth Management. Any information that references ISG, including their model portfolios, represents the views of ISG, is not financial research and is not a product of GS Global Investment Research and may vary significantly from views expressed by individual portfolio management teams within AWM, or other groups at GS. To the extent this newsletter includes material from Goldman Sachs Asset Management, please [click here]( for additional disclosures. 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