Key takeaways
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- Fed rate cuts without a recession should extend the economic cycle.
- Global growth remains sturdy, supporting equities and EM assets.
- High valuations raise the risk of higher volatility in the next phase.
- Outlook is mildly negative for the US dollar, according to Goldman.
What Happened?
Goldman Sachs strategists say the market rally can continue as interest-rate cuts from the Federal Reserve combine with firm global growth. However, they caution that the next phase is likely to be more volatile as stretched valuations create friction.
The bank expects non-recessionary rate cuts to be broadly supportive for global equities and emerging markets, even if price swings become more frequent.
Why It Matters?
This framing suggests a shift from a smooth, liquidity-driven rally to a more selective and volatile environment. Returns may still be positive, but investors should expect sharper drawdowns and faster rotations as markets grapple with “hot valuations.”
For portfolio positioning, this favors active risk management rather than simply riding beta.
What’s Next?
If growth holds up and the Fed cuts gradually, risk assets can still grind higher. The key risk is valuation-driven volatility — meaning the rally continues, but with more turbulence along the way.
