Has economic growth reached its peak pace? That was the suggestion Goldman Sachs Group Inc (NYSE:GS) chief economist Jan Hatzius made earlier this week in a research note on the current state of U.S. growth.
Admittedly, it is an easy message to misinterpret. On the one hand, even the rate of forward progress doesn’t improve, the economy is still moving forward. On the other hand, most consumers/investors believe that if economic growth isn’t accelerating, then it’s only a matter of time before it decelerates.
Hatzius was arguably leaning more towards the bullish side of the spectrum despite the superficial concern. In fact, he said as much on CNBC’s ‘Street Signs’ show on Wednesday. That optimism seemed to quell any misinterpretation of his written comments from Monday.
Still, there’s an inherent problem is entertaining such a debate at all, in that it implies anyone has any real clue as to what the future may hold.
What He, and They, Said
For the record, Goldman’s analyst note explained “The current pace is probably as good as it gets because we expect the impulse from financial conditions to gradually turn more negative.”
“More negative” is another way of saying “backwards,” to most investors anyway.
A couple of days later, he made it clear that even if progress gets stuck in its current gear, it’s still growth that’s stronger than the long-term norm. Earlier this week, but separately from Hatzius’ notes, Goldman Sachs U.S. growth forecast from 3.7% to 3.8%. Both would be welcome paces, well above any we’ve seen since 2014’s largely-anomalous surge.
It’s not an indictment of Hatzius, or Goldman Sachs; one message doesn’t inherently negate the other. If anything, it’s an indictment of the market-commentary industry, which all but begs experts to chime in with something new on a daily basis.
Goldman Sachs hasn’t side-stepped these trappings, as the list of mixed messages delivered just within the past few days makes clear.
Again, none of these message is wrong, or even misguided, by themselves or as part of a bigger picture. Collectively though, they don’t paint a clear picture at all.
And, maybe that’s the point.
The 1989 movie “Say Anything,” written and directed by Cameron Crowe with John Cusack in the leading role, was an amusing but accurate nod to the notion that sometimes it doesn’t matter what you say, but that you just say something to fill in the silence.
As someone who’s been in the equity market business in a variety of roles for nearly two decades now, yours truly here can confirm that the industry of providing market-related commentary and insight is occasionally like that movie. Sometimes comments are made simply because they’re expected. Dish out enough of them, and eventually one will be interpreted in an unintended way.
That’s not a dig against Jan Hatzius, or Goldman Sachs CEO Lloyd Blankfein or any other member of Goldman Sachs’ staff. Goldman is one of the best, if not the best, name in the research business.
But (and this absolutely applies to me as well), no opinion is inarguable, nor is it always the whole story. Indeed, there’s always more to the story. Take all commentaries with a grain of salt, adding them to a collective body of commentaries that explain the risks and rewards of a particular stock, or the pros and cons of the economy at any given time.
Bottom Line on U.S. Growth
As for what this has to do with Goldman Sachs’ view of the economy and the prospects for U.S. growth, nobody really knows what the next few months hold, let alone the next few years. It’s a reality that’s not conceded often enough. There are some very educated guesses, but certainly no guarantees.
To that end, and to the extent it’s possible to make such a call, I agree with Goldman/Hatzius that it’s going to be tough for economic growth to accelerate above its current pace.
I’m a little more optimistic than a handful of pessimists are, however, in that I think U.S. growth will continue to chug along for the foreseeable future without slipping into a recession. Capitalism… ok, greed always finds a way.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitterat @jbrumley.