US economic growth for this year is peaking – Goldman Sachs

The Goldman Sachs strategists warned that the US economic growth could be peaking for this year, as the positive impact of the fiscal stimulus wanes.

Key quotes

“Economists predict 10.5% GDP growth for the second quarter, the strongest quarterly growth rate since 1978.” 

“Growth in the third and fourth quarters of this year will clock in at 7.5% and 6.5%, respectively. Growth is then seen slowing in each quarter of 2022 — by the fourth quarter Goldman is modeling a mere 1.5% GDP increase.” 

"Although our economists expect U.S. GDP growth will remain both above trend and above consensus forecasts through the next few quarters, they believe the pace of growth will peak within the next 1-2 months as the tailwinds from fiscal stimulus and economic reopening reach their maximum impact and then begin to fade.”

"Decelerating economic growth is also typically accompanied by sector rotations within the equity market.”

"Cyclical industries tend to lead the market in environments of positive and accelerating economic growth, but as growth peaks and decelerates more defensive industries typically outperform."

FX implications

The US dollar index drops 0.10% to trade at 91.25, as of writing. The dollar gauge resumes its downside momentum after facing rejection just below 91.50 in the US last session.