Comments today in a morning note from Noah Weisberger, Head of Macro Equity at Goldman Sachs:

“Amid sharp moves in asset markets in recent weeks, the debate has switched to the new risks that the market appears to be signaling. In particular, markets appear to be pricing a sharp downgrade to both US and global growth views and significantly lower inflation risk across the major economies than they were a few weeks ago.

Economic reality appears to have changed less. Global growth has been slowing, but the move has been gradual and there is little sign that it is accelerating. US momentum has softened a little too, but we expect growth to remain solidly above trend. At the same time, the drop in oil prices is as much a reflection of supply as demand factors. For consumers in the largest economies, it should provide meaningful relief, offsetting the pressure from tighter financial conditions and weaker global demand.

Growth downgrade looks large relative to fundamentals. As a result, we think the market is likely overreacting to the growth news here. That is clearest with respect to the US outlook, but we think probably also true outside the US after the latest fears. On the inflation front, we are more sympathetic to the view that risks are lower than the market previously expected. But even here, the shift in pricing has been large.”

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