YouSaid · the spoken record

Alison

lines on the record: 48
first: 2020-03-23
most recent: 2020-03-23
sittings or episodes: 1
sources: podcast

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“Just add one other thing to that, which is that this to some degree is going to illustrate how difficult inflation. I mean, if something, if a particular service no longer exists, everything, all the sit-down restaurant meals are shut down, then that's not going to show up in the inflation numbers, but in some sense that's almost like a price of infinity for restaurant meals, even if you really wanted to pay whatever it takes to have a sit-down restaurant meal, you wouldn't be able to do it. But of course, that's the sort of thing that you can't incorporate in official inflation numbers.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“For example, workers are not willing to go to manufacturing jobs or other jobs that require them to be around other people in a way that might lead to shortages of goods as well, as well as the obvious hit to demand. So probably disinflationary, but more complicated than your usual demand-driven recession.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Thanks, Alison. It's a tricky one because it's hard enough to size the size of the hit to supply and the size of the hit to demand. But ultimately, the impact on inflation should depend a bit on the ratio of those two things. I think in the near term, we're very likely to see price declines on things like hotel stays and airlines, which we're already seeing. We've compiled a tracker of high-frequency price data, which we included in our update of high-frequency economic indicators every Monday and Wednesday. And I think by the time you get the March inflation data, you'll probably see some early signs of that. Down the road, our best guess is that this proves to be disinflationary. We base that assumption on what we've observed in other countries that have had similar larger shutdowns, but before the US has had them. But it's very hard to know, and I think it comes back in part to that issue I raised earlier, of to what extent”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Just to emphasize that it would be an extremely negative outcome. And while we're not epidemiologists, so it does seem that that is quite an extreme scenario to have the same kinds of shutdowns lasting for such a long period of time. So that certainly wouldn't be our baseline, you know, despite the fact that we recognize there are some clear downside risks to the idea that over the next few months we'll get our arms around this. We do recognize this, but this is a somewhat extreme alternative in my view.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Go back to their, I won't say renormalize their behavior and weather testing is more dramatic and therefore can isolate it. So those are some of the variables that I'm not really an expert to comment on. But from an equity perspective, if we think about what the earnings prospects are, we are expecting earnings to decline this year by 33% relative to a year ago, and then rebound dramatically to by almost 55% to $170. So from $165 last year, $110 this year, and then $170 for next year. So clearly, if the virus is a drag on growth in the country for the coming year into 2021, we'd have far less earnings, and therefore the market values would be much less. That is, again, the assumption we're making is that there is Some improvement”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think there's a couple of ways to think about that. First, I'm not an epidemiologist, but the idea of a risk would be potentially like the Spanish flu a second round. You could have a situation where there's a hiatus in the middle of the year and perhaps things are looking better there. And then you could have a resecond round, if you will, in the fall, which would be not in our forecast and non-assumption we're making, but that would be a big negative. And so the equity market would not have the rebound that we're anticipating would be one. Again, qualifying my response of not being epidemiologist, there is the idea of a herd immunity at some point. Everybody will have gotten this, will have, but might have gotten the disease, and therefore it's people can.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Then have kind of a dose of more Keynesian demand destruction on top of it. So yes, it would be quite a negative scenario, obviously, though not necessarily, it wouldn't necessarily manifest itself in rates of contraction that are quite as high as what we're likely to see in the very short term. It's really more that you get a big contraction up front and then you maybe get some additional modest contraction on top of it. And that might not look quite as bad if you just focus on the sequential, but it actually be a really very severe outcome, very, very negative outcome.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“It would basically mean that there is no rebound and you keep significant parts of the economy shut down in many places since I would assume that this would apply in large parts of the global economy. And you would I don't know if you would get additional negatives. Probably you'd get some additional negatives because if this lasts for a long time, then the ability of the policymakers to kind of prevent or reduce second round effects becomes weaker because resources get scarcer. And so you'd have to worry about significant negative multiplier effects on top of the shutdown. So it wouldn't just be the shutdown sectors that would be still shut down, but also other sectors where you”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Okay, great. Maybe a question to Parter for two answers, one from Jan and one from David Costin. Basically, there's just tons of questions about if this goes on, if we see massive mitigation measures continuing for six months or until we get a vaccine, what are we looking at from an economic perspective and from an equity market perspective? So really what is the worst case scenario playing out here? What would that look like? Maybe turn to you, Jan, first on that.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“In 2021, in that scenario. And then, of course, there's the scenario where you have a divided government, and in that scenario, I think probably not very much happens with the caveat that so much, even of the post-election policy response now really depends on what happens with the economy over the course of the next several months and how Congress and the administration, whichever administration feel that they need to deal with continuing the response to this in 2021. So ultimately it feels like that's going to be as much of a factor even”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“I mean, just in terms of the risks around the election, I would agree that particularly for the equity market, it does seem like the main issue would be tax policy and tax reform. I won't get into the specifics except to say under an all-democratic scenario, you probably would see tax legislation that would increase the corporate tax rates somewhat under an all-Republican scenario. The discussion had been that we could actually see some additional tax cutting potentially for middle incomes. Unclear, frankly, what the prospect is for that now in that scenario simply because the federal government will have run such a large deficit this year. It's a little bit harder to see how you actually would see any further fiscal easing.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“As a political economist and probably addressed that, had been focusing as a strategist a lot on the prospects of tax reform if you had a potential for a unified government. Not clear what policy will be post-election. It will really depend on the path of the economy. Alec perhaps has more to offer on this point.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“I didn't even realize it was election happening. It's really remarkable how just a joke, of course. Just the remarkable how fast things change inside of a month. A month ago, everyone was focusing on the idea of Bernie Sanders was going to be sweeping into the Democratic nomination. Of course, that worse dramatically, and now Joe Biden looks to be the presumptive winner of the nomination. race is likely to tighten for the near term the driver of the equity market is likely to be entirely focused on the virus and whether the number of cases that are reported are likely to eventually decelerate and turn down that's a key inflection point that we would we would expect so i know alec uh hopefully he's still on the line”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“For equities is extremely wide. Bond yields have been extremely volatile recently, but somewhere between 50 basis points and 1%, depending on the day, means that the earnings yield for the market is extremely wide. I'm expecting that it continues to widen between now and probably the middle of the year, but ultimately it will decline somewhat as the visibility and expectations of growth in 2021 improve and so that's the thought process that we have at better economic growth, risk premium comes down, and the valuation of equities looks particularly attractive versus the underlying earnings growth prospects.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Okay, so just to clarify, it is 3,000 as a level for the SP 500 at the end of 2020. And in part, at that time, the equity market, we expect, will be focused on the earnings prospects and the economic activity in 2021. And as you heard from David Merrickle a minute ago and also from Jan, the view from Goldman Sachs research is that we have the economy as a result of some fiscal stimulus, a significant amount of fiscal stimulus, of course, pushing through the economy. That does increase activity for next year. And that is really the underlying force behind the DFUS equity market recovering, part number one. Point number two is the relative valuation of the equity market compared with fixed income alternatives still means that the risk premium”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Okay, great. Let's turn David Costin if you're still on. There are questions about that 3,200 year-end target, some pushback in terms of how we can know that, given that we don't know the trajectory of the disease in the economy, obviously. How are you thinking about risks around this view?”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Something that central banks or fiscal policy can address. But we're seeing that pretty much everywhere. In terms of where we are now for global growth for 2020 as a whole, our forecast at the moment, a top-down forecast, is minus 1%, which would be a bit weaker than in the global financial crisis or the year following the global financial crisis when the GDP impact was most visible. So it's a pretty deep global recession, but really very, very front-loaded in the first half of the year, especially in the second quarter for most countries outside of Asia and outside of China in particular.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Well, we're seeing I think a lot of similar things in a number of economies with very large and very sudden stops to activity in a lot of the places outside of Asia. Asia is a bit of a special case, of course China already had what we think is a 42% quarter and quarter annualized decline in GDP in the first quarter. But if you look at Europe and the US and places like Canada and Australia, those big hits are really going to come in the second quarter. And central banks and governments are extremely active in trying to combat, especially the second order effects of that big hit to activity. I mean, the first order hit is somewhat unavoidable and it's not really”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Let me so Jan has been able to join. And so Jan, let me turn to you briefly because there are a number of questions about the global growth forecast. So why don't we hit it all together? Can we put the US downward revision in the context of global and just give us a quick snapshot of what we're seeing globally at this point? And we will get through a lot of client questions in that way.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So, Alec talked about what the Fed had unveiled this morning. Our basic thought is that those actions are very helpful in terms of keeping the corporate debt market functional. We would expect the final bill to make more funds available for these facilities so that the Fed is able to operate at the size that it sees as necessary.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“One more question for you, David, which relates to, you know, just to clarify that our forecasts do embed the magnitude of fiscal stimulus that's being currently discussed, as Alice said, in the 1.4 to 1.5 with lots of caveats, but that they do include that as well as these Fed actions. And if there's anything incremental, we would expect the Fed to do or think the Fed should be doing in this environment.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“There are pressures in both directions. The first would encourage a higher unemployment rate, the second a lower. It's hard to see at this point which one of those will be more effective. But I think policy will eventually play some role in just how much the unemployment rate rises. In terms of whether or not we would see a bounce back that is quicker than we've seen typically, I think the answer is probably yes. So historically, we've never seen the unemployment rate come down following a recession by more than eight-tenths of a percentage point in a quarter. And that was in the early 80s when the recession was induced by a switch to very high interest rates and then suddenly a switch to very low. In more normal recessions, it takes even longer than that. What I think is different this time around is once people are suddenly willing to go outside, go to restaurants and so on, you probably should see a wave of hiring of, for example, waiters at businesses that had previously been shut down. So in terms of the”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Sure. I think there are two questions here. One is how policy will affect the labor market numbers, and the other is once we do start to recover, how quickly does that come back? On the policy side, we don't know what's going to be in the final bill yet, but I think there are two relevant provisions. On the one hand, we already have in place some ramping up of the generosity of unemployment insurance. States are allowing more people to qualify for that. So if you're, say, a restaurant owner who wants to be able to rehire his workers when all of this is over and doesn't want to antagonize them too much, that higher replacement rate, that more generous unemployment insurance might make it a little bit easier for you to lay your workers off and essentially put them onto put those costs onto the government's budget. On the other hand, it sounds like the bill will include some small business lending, which will require businesses not to lay off workers. So I think there are”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Of all questions about David obviously, we have these pretty extreme jumps in unemployment now forecasted. Can you compare this? I mean, how quickly could those come down? And maybe this is also a question for Alec in a way, given the type of fiscal programs that are being put in place to temporary support people who are being furloughed and laid off for short period of time. Can those numbers come back down quickly? Normally they don't. I mean, so there's a lot of questions about how this could evolve from a labor market perspective and then feeds you to the economy.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“So on. A lot of businesses would reopen much more quickly than is typical in a recession. In terms of the downside risks, one thing that worries me is that we are now seeing workers being afraid to go to work at places like auto plants. If that becomes more broad-based in the U.S., I think that would imply some downside risk. And that's certainly something we could see at the automakers, for example, workers have basically taken the view that hundreds of them touch the same parts on an assembly line. This is a dangerous environment to be in. We have made some allowance for that in our forecast, but not for sort of a true broad-based shutting down of, say, construction and manufacturing because everyone is fearful of contracting the virus.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“I would say in terms of when we kind of go back to normal and what that implies about the RSTAR growth forecast, for now we've tried to take a relatively agnostic view on that by assuming that the virus drag fades gradually over time, that 10% of it drops off each month. I don't think of that as necessarily implying some big breakthrough in treatment or some major change in the virus itself. I think of that in part as adaptation and in part as kind of various gradual improvements on the medical side. Obviously, there's a lot of risk that potentially to the upside, if you did have some treatment breakthrough earlier, that eventually when the bounce back comes, it will look a lot more sudden and sharper than what we have in there, just given the massive magnitude of the pullback and the fact that if people are suddenly willing to go outside, go to restaurants, go to stores.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“That'd be great. Let's go right to webcast questions at this point. David Miracle, many questions about the risks to our views, and in particular how we think the second half of the year will unfold. Can you give a little color on what we're assuming right now and what the risks are around that forecast?”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“In the absence of that, the market is likely to move downwards towards a level of about 2,000. The market currently around 2,300 or 2275 today is likely to move towards 2000 level, but ultimately rising back as investors begin to focus on the 2021 profit outlook. And so for last year with $165, this year about $110, so down almost 33%, but rallying back very significantly for next year at about $170, which is up almost 55%. And that is consistent with some of the experiences in a bear market, an event-driven bear market, which we're currently having clearly by the virus. You absolutely get very sharp declines and then pretty swift rebounds. So Allison, I'll stop there and we can go for questions.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“How their range is that they've typically have exposed. They were at the peak level almost two standard deviations above average at the end of February. And as of last Friday evening, they were around one and a half standard deviations having reduced their holdings, reducing their positions. But importantly, as you see in the troughs over the past decade, other points in time when the market had hit a bottom, the sentiment has been particularly negative to the tune of two and a half to three standard deviations. So our conclusion of this is that there's still more selling pressure likely to happen. We see that in the prime brokerage data of colleagues in the areas at Goldman Sachs where they have come down, but not necessarily as much the degrossing is taking place. So we have the economic activity we're expecting to get better. We're expecting this still more selling pressure to take place. And ultimately, it will depend on a cresting of the number of new cases that are being diagnosed or recognized from the testing. So those are sort of three metrics that we would look for.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Ultimately, it's the second quarter that is, I think, the worst, the nator of the economic environment, as you heard from David, and also from an earnings perspective. But ultimately, we do get back later this year in terms of the growth by the fourth quarter. So the reasons for the U.S. stock market to be going lower before it goes higher in part relates to this exhibit where the consensus expectations still have to come down for investors to be some confidence as to what the earnings that they're paying for are likely to be. That's the first issue. The second issue was the idea of positioning of U.S. portfolio managers. If we look at the mutual funds and the hedge funds and the international investors and the retail investors and the pension funds and all these different ownership categories in the US equity market, we can see from the positioning relative to”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“In terms of economic activity, part of which, a large part of which relates to the stimulus that Alec just spoke about, which is almost 7% of the U.S. economy coming through. And so that is a big, one big, big reason for that. But the idea in the following slides shows the path of overall EPS or earnings per share growth for the S&P 500. And it's one of the reasons why the market is likely to go lower. And that is to say that the companies will not be reporting their results for another month. So most of the companies will report between, concentrated between April the 20th and roughly May the 2nd. So that narrow period of time when most companies report results. Of course, some companies will be reporting sooner than that, but the dominant part, almost two-thirds of the market cap is reporting in that period of time. And there's an absence of real information. They're going to be reporting their first quarter results.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Back to 30 years, you've only seen this previously in the financial crisis at the end of 2008. So the idea of daily moves that have been typically averaging 6% for the month of March is just extreme. And it is, I think, illustrative of the fact that the information flow is still disjointed as to what's actually happening as more and more states have shelter in place and various other municipal and civil limitations on people moving around. And so on the following slide actually shows the path of the U.S. stock market as we envision it this year, which is we're already down 32% in a month. The idea of the market troughing sometime in the latter part of the second quarter. We'll get to some reasons why that is the case in a minute. But ultimately, the economy does.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Well, the music aficionado, usually the first cut is the deepest, but the report we wrote on Friday following on with David Miracle's comment about the big GDP revisions. We've also lowered our S&P 500 earnings for the third time in a month. We're now looking for 33% decline for earnings in 2020 compared with 2019. It's a very significant decline and it relates to the swiftness with which the economy has been deteriorating, which is why we've had these three different cuts. I had a couple of exhibits that I thought would be helpful to show in the context of this. The first is page number, I guess it's seven, slide seven, which is the volatility in the market. This is the U.S. equity market, realized one-month volatility going back for 30 years. And you can see the concept that we are at extraordinary peak.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Okay, great. Let's leave it at that for David. Apologies for having some technical difficulties with Jan joining the call right now. We're going to go straight to David Costin, who's also made a very large downward revision to earnings forecast for this year. David, can you please walk us through that? The third cut is the hardest or something like that, most painful. Would be great to hear what's driving your view.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Reports and they reveal a huge and historic surge in layoffs over the last week. We think somewhere around two and a quarter million jobless claims were probably filed, which would be about triple the biggest weak in U.S. history. Those numbers will come out Thursday. That will probably be the key U.S. data point for the week. In terms of the unemployment rate path, we expect it to eventually peak about 5.5 percentage points higher at around 9%. That is somewhat more than the usual empirical relationship between GDP and unemployment would imply, but we think that makes sense in these exceptional circumstances because the GDP hit is likely to occur disproportionately in labor-intensive industries that employ many low-wage workers. And because businesses like restaurants and retail stores are facing an extremely abrupt disruption of cash flow that will force them to lay people off. That's all for me.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Frequency indicators, which we've been sending out every Monday and Wednesday, as well as a compilation of anecdotal data from press reports. We estimate that these effects sum to a nearly 10% reduction in the level of GDP by April. We assume a gradual normalization from there with the virus drag fading by about 10% each month. That view reflects a combination of people learning to adjust and possible medical advances without taking a strong view on exactly when a breakthrough might occur. These assumptions imply a negative 24% annualized growth pace in Q2, and because that number is so huge, even the slow normalization we pencil in implies big quarter-on-quarter growth rates in the back half of the year. These downgrades to our growth forecast imply a major deterioration in the labor market. This appears to be happening very, very quickly. Last week, we aggregated dozens of news stories from state-level jobless claims.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, thanks, Alison. So last Friday we marked down our US growth forecast to a quarterly annualized pace of negative six in Q1, a negative 24 in Q2 plus 12 in Q3 and plus 10 in Q4. That would leave full year growth for 2020 at negative 3.8% on an annual average basis. This would be a truly historic decline. That Q2 number is two and a half times the worst number we have seen in a quarter in the modern history of the U.S. national accounts. We get to these numbers by estimating the likely hit through three channels. First, a reduction in the type of services consumption that require face-to-face interaction. Second, a reduction in building activity. And then third, a reduction in manufacturing due to reduced demand for goods, supply chain disruptions, and plant closures due to worker fears of the virus, which we've already seen take place at the automakers. We've calibrated these effects using very timely high”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Okay, great. Thank you so much, Alec. We're going to move to David Miracle. We made some pretty large downward revisions in our U.S. growth forecast. David, can you talk us through that forecast revision? What's behind it?”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Would like to see. So, the main omissions at this point one is The original Phase 2 bill that has already passed and become law had about, we would estimate $50 billion or so of aid to states through the Medicaid program. This bill doesn't have anything in addition to that. Democrats are likely to push for some additional fiscal aid to states. And my guess is that they will end up getting it. And then the other question is around spending on the healthcare sector itself. The bill does have additional resources to the healthcare sector, essentially for hospitals dealing with all of this. It looks likely that there will be additional federal spending for the healthcare sector and probably other federal spending on top of what's already in this bill. So if you take those things, add it to what seems to already be there, you're getting to numbers that are more like 1.5, 1.6 trillion at least. So maybe I'll stop there in terms of the details.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“The other two things I'll just mention one is tax relief for individuals. This would come, I think, as most people are aware, through a tax rebate, $1,200 per adult with an income limitation of $75,000 for individuals, $150,000 for couples. And then the other piece is unemployment compensation. And so there, the bill would essentially add to the amount that every unemployed worker gets every week. So instead of getting half their wages roughly, which is the standard benefit, they would be getting half their wages plus another $600 per week. That's probably just on its own going to cost in the tens of billions, if not more than that. So that is also a pretty substantial benefit to individuals. And then finally, the other questions are around where there are omissions in the Senate bill that some Democrats”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Assistance around employee retention, executive compensation, buybacks, and so on. So I would say overall, it seems fairly likely to us that this kind of facility will be included. What's less clear is what constraints will be put on the companies that are actually borrowing. One other thing to note on that facility when the Fed made their announcement this morning, they announced they would be providing these credit facilities for primary corporate credit and then also secondary market corporate credit, but there was no announcement regarding municipal debt. In addition to the corporate credit facilities that the legislation of the Senate would create, the Senate legislation would also allow for purchases of state and local obligations as well. And so that is one big difference that the legislation would make in addition to just the much more substantial amount of resources. Beyond that,”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“The ESF would then capitalize, provide capital for a number of facilities. That is still somewhat controversial, not so much around the concept, but around the details. And so specifically the problems that some congressional Democrats have is around the open-ended nature of the Treasury's authority so they can essentially do more or less whatever they want with this money because the Exchange Stabilization Fund, where this money would be going, has essentially been around for almost 100 years. It's something that the Treasury has brought authority over. They always have. And so there's some concern about trying to limit what the Treasury can do with this money. And then beyond that, there's also a number of questions around what constraints would be put on the companies receiving funding, specifically the airlines and the ones receiving the more direct”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Portion of sense and other things. Otherwise, the rate would be around 7%. So that whole program is worth around $300 billion. It's similar to what was being discussed last week, but it's changed a little bit. The thing that's new related to business lending and what airlines, air cargo, and aerospace specifically would be getting $75 billion across the three of them. So it's 50 for airlines, eight for air cargo, $17 for aerospace in loans and loan guarantees through the Treasury, potentially with Fed involvement. And in return for that, we have to follow a number of rules around employee retention and so on. In addition, and this is the particularly new part, there's another 425 billion that would be given to the”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“In the hospitality sector, so hotels, restaurants, et cetera, if it is a location that has 500, those loans would go through the banking system, be guaranteed by the small business administration, 100% federal guarantee, and they would be given in the size proportional to business, specifically two and a half months of payroll expense and wages plus benefits would be the maximum loan size under this program. Once the businesses have these loans, they would be eligible for loan forgiveness, so they wouldn't have to pay back the loan proceeds if they have spent the entire amount on payroll, mortgage, rent, or utilities. So if they spend, they have to pay it back, if they spend it on that, they do not have to pay back the”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Fiscal reaction would come necessarily in 2020. Sometimes these things do bleed over into the following year or the following couple of years. So while the numbers are clearly big and getting bigger, take them with a slight grain of salt just because they haven't an incentive to talk about these numbers that are maybe a little bit larger than they'll turn out to be. As far as the composition, it is similar to what we and others were looking at late last week, but some things have been added. So the things that are similar. First, a small business facility. This is arguably one of the most important pieces of legislation, basically what it would do is provide loans to small businesses, which are defined as businesses with less than 500 employees, and there's one exception to that, which is”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Sure. So, in terms of the details, at least as they stand right now, the overall size looks like it's in the range of 7% of GDP or so. So it's looking like 1.4, 1.5 trillion in terms of the sort of the headline number of what the Senate looks like. It'll consider potentially today. With that said, it's important to keep in mind two things regarding that size. Number one, some of the fiscal resources that would be devoted to the COVID response would come in the form of financial guarantees and things like that as opposed to sort of traditional demand side stimulus. So it's a little bit apples to orange comparing some of these provisions to other provisions. They're obviously all important, but somewhat different. And then second, not all of the spending would necessarily or all of the”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“Morning, afternoon, and evening to everyone. Thanks for joining us on this update call. We are going to provide an update on the U.S. fiscal stimulus program and on our growth and earnings forecast, both of which we made large revisions too. On the call today with me, we have Alec Phillips, our chief political economist at Jan Hatzius, our chief economist, David Miracle, our chief U.S. economist, and David Costin, our chief U.S. equity strategist. So with that, let's dive in. Alec, let's start with you. Obviously, Congress has been hard at work, but nothing is quite done at this point. What is the latest on the U.S. fiscal package in terms of size and composition?”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT
“This is Exchanges at Goldman Sachs, where we discuss developments currently shaping markets, industries, and the global economy. I'm Jake Seward, Global Head of Corporate Communications here at the firm. The topic of today's episode is our update on U.S. growth and earnings forecast and expected stimulus programs out of Washington to give you an in-depth look on this topic. We're going to share a call that was held for clients earlier today with our top economists and strategists. That call featured Jan Hatzius, Goldman Sachs' chief economist, Alec Phillips, our chief political economist, David Merrickle, Chief U.S. economist, David Costin, Chief U.S. Equity Strategist and was hosted by Allison Nathan, a senior strategist in the firm's research division. Now over to that conversation. Hope you find it informative.”
2020-03-23 · Goldman Sachs Exchanges · Update on US Growth and Earnings Forecasts, and Expected Stimulus Programs · IDENTIFIED FROM THE TRANSCRIPT