Goldman Sachs strategist: The economy is entering a new super cycle

Peter Oppenheimer, chief global equity strategist and head of European macro research at Goldman Sachs, believes that investors can learn a lot about long-term investing and returns by exploring the history of economic cycles and patterns.
Oppenheimer explained: When we think about long-term investing, it\’s important to understand cycles because investors will see patterns repeating historically in different situations.
If investors look at economic cycles from growth/expansion to contraction/recession. These tend to repeat themselves during periods of high or low inflation. And around them, investors also see financial market cycles.
Try to understand what stage of a cycle an investor may be in. When a turning point may be around the corner. This can lead to great returns for investors.
Oppenheimer explains all this and more in his new book, \”Any Happy Returns,\” which looks at the complex interconnections between financial markets and major turning points in economic factors. It also Affected by factors such as policy, system, politics, geopolitics, demographics and technology.
He believes that the market is about to enter a new super cycle – a post-modern cycle – which, while sharing some similarities with previous cycles, is very different from many of the cycles seen before.
Oppenheimer listed several super cycles in history since World War II. For example, one began in the early 1980s.
He explained that this period was characterized by peaks in interest rates and inflation, followed by long-term declines in capital costs, inflation and interest rates, and by economic policies such as deregulation and privatization.
At the same time, geopolitical risks have eased and globalization has developed in depth.
But clearly, not all of these factors will persist in this way.
We are seeing the end of cheap money. We are still in an era of higher interest rates and higher costs of capital.
We\’re seeing a tight labor market. Unemployment is falling – pushing up wage costs, suppressing profitability – and a shift away from globalization and world trade towards more regionalization and localized production. This is driven in part by geography. Driven by political tensions and supply issues, these factors are driving up costs. There are also new trends such as more protectionism and tighter regulation.
This is very different from what we have seen over the past 20 years.
Oppenheimer pointed out that all of this means that investors will receive lower returns. But that does not mean that there are no opportunities.
Following the success of his new book, The Long Good Buy, he focuses on the significant economic impact that decarbonization and AI will have.
People are worried that artificial intelligence will replace jobs. But new goods, services and job opportunities will be created. In the long run, this will increase productivity and efficiency, which will be beneficial to economic growth.
This is happening at a very exciting time. In an era of aging population, the U.S. labor market is struggling to find talent.
Economists researched by Goldman Sachs estimate that the economy is likely to grow at an annual rate of about 1.5% over the next 10 years.
These are indeed very meaningful.
Oppenheimer said that in order to realize the potential of artificial intelligence, we need a lot of energy. And decarbonization is to transform our economy into renewable energy.
The current problem is the enormous complexity and cost of decarbonization.
According to the United Nations, this number could be around $100 trillion by 2040.
These are huge bills. But if we allocate the costs sensibly and do it right, energy costs have the potential to drop to zero. That would be a huge long-term boost to economic growth.
We are entering a world that creates more uncertainty and constraints on financial returns than what we have seen. But some of these big shocks (decarbonization and artificial intelligence) will reshape our economy and may create some Very good opportunity.
Advice to investors Oppenheimer said that this time last year, people had high expectations for a recession due to rising inflation and interest rates. But in reality, I think the situation is better than people feared.
We may see a soft landing for the economy. Inflation will fall rapidly. Interest rates are also close to falling. And interest rates may fall cyclically over the next year.
He said: However, financial markets have priced in a lot of good news. We have seen strong gains in stocks recently. Valuations have also increased. So we should be cautious about this.
What I would emphasize is the importance of having a longer-term view rather than relying on short-term gains from rising valuations, and diversifying assets to reduce risk.
He added: People should pay attention to technological developments and the move towards a decarbonized economy.
This combination creates losers. But it also creates more winners.