A special year-end quiz on the global economy

India's GDP growth to outpace most big economies # # --------------------------------------------------------------- The key takeaways today: - Lessons from the NBA on the business of sports - The case for taking on more investment risk - India's election-year economy will likely be a tale of two halves - Why US banks are optimistic about a soft landing - Hedge funds are big on Big Tech - Does cash require caution? - QuickPoll: Investors turn bullish on stocks and short-term bonds - Quoted at GS: Listening to the quietest person in the room - Briefings Brainteaser: A bumper end-of-year quiz --------------------------------------------------------------- Adam Silver on how the value of NBA teams grew 55 times RedBird Capital Partners Founder Gerry Cardinale and NBA Commissioner Adam Silver Adam Silver, the commissioner of the National Basketball Association, sees a future for the NBA that uses new technology to make the online fan experience more engaging. That's important, because seats for live games are already mostly full, with arenas at 95% of capacity. “We don't have enough tickets to sell,” [Silver said in an interview with Gerry Cardinale, founder of RedBird Capital Partners]( at the Goldman Sachs Alternatives Summit in New York. “People want that shared experience.” Business is booming for the global NBA brand, Silver said, noting that the league, teams, and players have a combined social media reach of two billion people. The average value of an existing NBA franchise, meanwhile, has climbed to $3.85 billion, according to Forbes. That's 55 times what it was when Silver started in his first NBA job in 1992. --------------------------------------------------------------- The case for taking more investment risk in 2024 Against a friendlier macro backdrop, the case for adding more risk to investment portfolios may be rising. “The business cycle in general is supportive,” says Goldman Sachs Research's Christian Mueller-Glissmann on [Goldman Sachs Exchanges](. “We want to be invested going into next year. We're neutral equities, neutral bonds, and we've downgraded cash from an overweight. And so to some extent, [we're going back to a 60/40 portfolio]( And while stocks have moved higher in recent weeks, investors should use any market setbacks to buy more equities. “One of the reasons why we said it's time to be invested next year is also that we expect lower risks from multi-asset portfolios, because you actually have more diversification,” Mueller-Glissmann says. From an asset allocation perspective, Goldman Sachs Asset Management's Alexandra Wilson-Elizondo is recommending that investors stay invested in stocks and be long on government bonds, but be cautious on corporate bonds. “Inflation coming down and moderate levels of growth are good for equity markets,” says Wilson-Elizondo. “And typically, going into a Fed cutting cycle, large-cap equities do quite well.” --------------------------------------------------------------- The Indian economy's tale of two halves A landmark general election in India, scheduled for the summer of 2024, will see the drivers of economic growth shift midway through the year, [according to Goldman Sachs Research](. Overall, despite food and oil supply shocks keeping inflation elevated in the first half of the year, growth is forecast to remain stable — making India a “port of calm” in the wider global economy. - In 2023, our economists expect real GDP growth to remain stable at 6.7% year on year, up from our earlier estimate of 6.4%. Among the 13 large economies in [Goldman Sachs Research's global outlook for 2024]( India's projected growth rate is the highest at 6.2%, with China in second at 4.8%, as of December 18. - Our economists expect 2024 to be a year of two halves for the Indian economy. As the election approaches, “we expect consumption growth to be driven by subsidies and transfer payments,” Santanu Sengupta and Arjun Varma, Goldman Sachs Research's India economists, write in their outlook for the Indian economy. After the election, they expect private investment to accelerate even as the government slows down the pace of capital expenditure. - As inflation stays high in the first half of 2024, our analysts expect the Reserve Bank of India to take its time cutting interest rates and don't expect the government to widen the fiscal deficit. Over the medium term, a decline in public capital expenditure as a share of GDP is likely to accompany other measures aimed at containing the rise in government debt. --------------------------------------------------------------- Why banks are bullish on the economic outlook Alex Blostein and Richard Ramsden on Goldman Sachs Exchanges The financial services sector is often seen as a bellwether for the economy, as banks can see firsthand how consumers and companies are spending, borrowing, and saving. With remarkably stable deposit flows, rising consumer lending, and tightening underwriting standards, banks are increasingly bullish on the economy. “Most banks have significantly reduced their view around the probability of a recession for next year,” says Richard Ramsden, business unit leader of the financials group in Goldman Sachs Research, on [Goldman Sachs Exchanges](. “If you ask them what their base case is for the economy, they will tell you that they expect a soft landing. And I also think that some of these tail scenarios around where interest rates could end up have been fundamentally reduced.” Meanwhile, private credit should continue to expand in 2024, as lenders increasingly step in to provide capital and as traditional banks and lenders adjust to higher capital requirements. “We broadly think it's still a 20-25% grower for the next five years,” says Alex Blostein, who covers asset managers and capital markets for Goldman Sachs Research. “And that's a function of both supply and demand.” --------------------------------------------------------------- The dominance of the Big Seven Megacap tech stocks are increasingly popular mainstays of [equity portfolios](. Collectively, the Big Seven tech stocks — Microsoft, Google, Amazon, Meta, Apple, Nvidia, and Tesla — now make up 18.9% of hedge funds' total US net exposure to single stocks, as reflected in our Prime Brokerage data (as of December 7, 2023). This compares to a peak of 20% seen in July, up from 9% at the start of 2023. The current share, part of a historically high phase, ranks in the 95th percentile compared to exposure levels over the past five years. --------------------------------------------------------------- Be cautious about cash? Brittany Boals Moeller at Goldman Sachs Private Wealth Management's At the Helm conference Clients should be wary about holding hefty amounts of cash, according to Goldman Sachs leaders Amal Alibair, Brittany Boals Moeller, and Matt Weir, [who spoke about portfolio planning]( Goldman Sachs Private Wealth Management's At the Helm conference. “When you have cash in your portfolio, one of the things you have to think about is inflation,” Alibair says. “You have to think about that reducing your purchasing power.” Weir adds that while cash may look attractive given high short-term rates, clients might be better-served by buying long-term bonds. “Given our expectations that the Fed will be cutting rates, we think locking in higher rates today is a smart idea," he says. But in terms of hedging against inflation specifically, Boals Moeller points out that stocks could be the best bet. “Every time you think about inflation, we hear about all these different asset classes — but equities are actually the one that's proven to be the most durable,” she says. --------------------------------------------------------------- December QuickPoll: Investors turn bullish on short-term bonds and equities Institutional investors have been getting more bullish on equities. Now they're increasingly bullish on bonds, according to the latest Marquee QuickPoll, which surveyed more than 800 investors in early December. Sentiment turns positive on bonds. In November, investors turned bullish on equities for the first time in two years. This month, the biggest turn was in the outlook for short-term rates, as a majority now see rates falling in the short term. Institutional investors are positive on US growth. About 32% of those surveyed expect the US economy to grow between 1.5% and 2% in 2024, compared with the Bloomberg consensus of 1.2% as of December 4, 2023. While elections are set to dominate 2024, with both EU and US polls on the calendar, investors don't expect it to be a tradeable theme early in the year. The most potent theme for investors is the rate-cutting cycles of central banks. --------------------------------------------------------------- Quoted at GS “One of the most important things I have learned is to make sure everybody has the opportunity to have a voice. Even if you're not the decision maker, you have a perspective on things. Even if you're the quietest person in the room, you have an opinion. Your job as a leader is to get that engagement from your entire team.” — US Navy Rear Admiral and Goldman Sachs managing director Richard Lofgren [on the importance of leaders engaging]( their teams for better decision-making and to bind the organization together. LCDR Clif Colbert (Goldman Sachs vice president) and RDML Richard Lofgren underway for Fourth Fleet experimentation in October 2023 --------------------------------------------------------------- Briefings Brainteaser: Stock indexes, natural gas, novel batteries, and more For the last Briefings of 2023, we bring you a bumper edition of our always-popular Brainteaser quiz: 10 questions, ranging over the world of finance and the global economy, all drawn from Goldman Sachs Research. The first of our 10 questions is below. Click through to play the full quiz. Since 1999, how many stocks have been removed from the S&P 500 index of US equities? A) 7 B) 53 C) 295 D) 871 [Click here to play the full quiz](. --------------------------------------------------------------- Goldman Sachs in the news [CNN.com]( December 18 [AI was the buzzword of 2023. What happens in 2024?]( [Institutional Investor]( December 20 [More than ever, Goldman Sachs has its sights on military veterans]( --------------------------------------------------------------- --------------------------------------------------------------- Some of the images used in this newsletter are sourced via Getty Images. The information provided in this newsletter is for informational purposes only and does not constitute a recommendation from any Goldman Sachs entity to the recipient. Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this newsletter or to its recipient. Certain information contained in this program constitutes “forward-looking statements,” and there is no guarantee that these results will be achieved. Goldman Sachs has no obligation to provide any updates or changes to the information in this newsletter. Past performance does not guarantee future results, which may vary. 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