Goldman's Hatzius and Kostin on Markets and Macro in 2025

Joe Weisenthal (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news.

Joe Weisenthal (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, it's my favorite time of year.

Tracy Alloway (0:26)

You know what? I was gonna say the exact same thing. I was gonna make the exact same comment. It's outlook season.

Joe Weisenthal (0:33)

It's 2025 outlook season, and our inboxes get flooded with various flavors of big picture outlooks, micro picture outlooks, 15 things to watch for within the industrial and trucking segment of the economy, 15 big questions we have for America.

Tracy Alloway (0:51)

Here's a list of all the things Trump is gonna make great again.

Joe Weisenthal (0:54)

Yeah, all these things. And these are some of my favorite sell side notes to read every year, but they always make for a thoughtful, something to do around this time of year.

Tracy Alloway (1:02)

Here's the big question. Do you go back and look at the 2023 outlooks?

Joe Weisenthal (1:07)

I never do. People always in our industry joke about that. They're like, let's go back. And I've seen it happen twice.

Tracy Alloway (1:13)

On a serious note, I know the analysts who produce these outlooks, it is their actual job to try to forecast the future. But I find it so difficult, especially in the current context, with so many uncertainties and the new administration coming in. I don't even know how you begin to try to figure out what the level of the S&P 500 is going to be under those very uncertain conditions.

Joe Weisenthal (1:38)

Well, most of the time, stocks go up and the economy grows.

Tracy Alloway (1:43)

That would be your outlook, is like, well, stocks are probably going to go up.

Joe Weisenthal (1:47)

Stocks will go up and the economy will grow in two and a half, three and a half. Anyway, we have much better guests.

Tracy Alloway (1:53)

Yes, we have people who actually do this.

Joe Weisenthal (1:55)

And are really, truly some of the best in the industry. And it is a real treat. We actually have them both together, which makes for an extraordinary opportunity. So I'm very excited. We have two guests, two of the perfect guests, I should say. We're going to be speaking with Jan Hatzius, Chief Economist and Head of Global Investment Research at Goldman Sachs, and David Kostin, Chief US. Equity Strategist at Goldman Sachs. David and Jan, this is such a thrill to have you on both at the same time and just talk about what 2025 is like because there's obviously a lot to talk about. I don't know, I'll start it with you, Jan. Actually, do you accept the premise that it's a difficult time? It feels difficult. It feels tricky. It feels like there's a lot of questions and uncertainties. Do you accept the premise that it's a unusually tricky time to be making a short-term or medium-term forecast?

Jan Hatzius (2:45)

I think it is a difficult time just because there's more uncertainty than normal about the policy environment. You have all the usual uncertainties around whether the consumer is going to continue to spend, we think yes. Whether inflation is going to continue to trend down, X any new shocks, we think yes. Whether the Fed will still deliver cuts just based on the underlying trend in the economy, and then you have to think about the potential impulses, both on the positive and the negative side, and obviously we'll get into those. But that just adds to the variability around the central forecast.

Tracy Alloway (3:24)

I have a lot of procedural questions when it comes to the outlooks. My first one is, do you guys talk to each other before you do your respective outlooks? Because I imagine what the market does is obviously going to depend a lot on what the economy does.

David Kostin (3:39)

There are, I guess, nearly a thousand people in the research department at Goldman. Jan is the head of the research department. And within macro, probably a hundred people. And we are pretty coordinated every week, have a conversation about what's happening in the different regions around the world economically, in commodities, in strategy, in rates. So we're pretty coordinated at the macro level.

Tracy Alloway (3:59)

Do you ever disagree?

Jan Hatzius (4:01)

We do. I do think that we spend a lot of time trying to get to the bottom of what the disagreement is about. And that often brings views more closely together. I think in the end, we do try to present a coherent overall picture, but that doesn't mean that every nuance is exactly the same. I mean, I think there is sort of a spectrum between having just one view of the world where there's zero room for individual kind of creativity and just having a bunch of people that have independent views that are not coherent. You have to find a place somewhere in the middle. I think we're more towards the coherent side than what I see in many other research organizations where it's really more individuals than a team effort.