Concerns about US budget deficits are beginning to drive up yields on longer-maturity Treasuries. Goldman Sachs Research forecasts that the dollar will weaken against other major currencies. Rob Kaplan, Goldman Sachs' Vice Chairman, notes that while Treasuries have long been the world's haven asset, longer-dated bonds haven't rallied this year, even as estimates for economic growth have declined. “So the question is: Is the 10-year and longer duration still the safe haven, flight to quality, asset?” Kaplan says. Ashok Varadhan, co-head of Global Banking & Markets at Goldman Sachs, expects the Treasury yield curve to steepen: Shorter-term Treasury yields are likely to decline relative to longer-dated Treasuries as the Federal Reserve lowers its policy rate. “The question is whether the data warrants easing a little or a lot,” he says. Varadhan says he's “super bullish” on equities, even though they've reached all-time highs. There's a tailwind to the US economy from deregulation, he says, and it will be important to assess whether the US manages a fair recalibration of trade and continues to attract the best, brightest, and most able people to its labor market. “And we're not even in the first inning of companies implementing AI,” Varadhan says. “Once that company implementation happens, you get that productivity dividend.”
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