By Randy Myers
Even with war in the Middle East disrupting global energy supplies the outlook for the U.S. economy remains positive, says Jennifer Guenther, vice president and senior market strategist in the Client Solutions Group at Goldman Sachs Asset Management. She also contends that the backdrop for fixed income remains favorable and that the Federal Reserve’s next push on interest rates is likely to be lower rather than higher.
Speaking at the 2026 Stable Value Investment Association (SVIA) Spring Seminar on April 15, Guenther conceded that a positive economic and financial market outlook may seem counterintuitive at a time when headlines are dominated by geopolitical turmoil in the Middle East. The U.S. and Israel have launched a war against Iran, and Iran has retaliated by closing the Strait of Hormuz, through which a sizable portion of the world’s oil supplies are shipped. But, she said, markets are processing the resultant energy shock differently than they would have in the past, given that the U.S. economy today is 70% less dependent on oil than it was five decades ago.
“We are in the midst of what is the largest energy disruption in history,” Guenther said. “With 16% of global oil supplies offline, you have another 10% of oil and gas production being shut in. But at the same time, markets have pretty much round-tripped on all of this (and are) … treating it like a short-lived shock.”
To be sure, Guenther warned, the longer the oil market is disrupted the more challenging economic growth, the inflation outlook, and market sentiment will become. But she said investors see more risk to being on the sidelines than being invested at a time when “everything could change at the drop of a tweet or headline.”
“You need to be positioned for both the upside and the downside,” she said.
Guenther stressed that the U.S. has an economic advantage over many other developed economies because it is far less reliant on imported energy. That distinction helps explain why a severe energy disruption can still produce a much milder macroeconomic impact in the U.S. than investors might have expected based on historical analogies.
Guenther did not entirely discount the economic cost of the war in Iran. She said Goldman Sachs Asset Management estimates that every 10% increase in oil prices trims roughly 10 basis points (bps) from U.S. gross domestic product (GDP) and adds about 20 bps to headline inflation (versus 20 and 30 bps, respectively, for the Euro area). On that basis, the firm has lowered its forecast for U.S. GDP growth in 2026 from something close to 3% to about 2.3% and lifted its year-end core inflation expectation (as measured by the Personal Consumption Expenditures Price Index) from about 2.2% to about 2.5%. That is a less favorable mix than Goldman had expected entering the year, she said, but still consistent with a constructive, not recessionary, base case.
Economies that import a larger share of their energy, including Europe, Japan, India, and China, face a steeper hit to growth and more inflation risk than the United States. Fixed-income markets there are priced for interest-rate hikes, she said.
In the U.S., by contrast, the most likely direction for U.S. policy rates (the federal funds rate) is down, Guenther said. That forecast rests largely on these three factors: inflation has been improving, the labor market is stable but vulnerable, and the policy rate remains above neutral. Taken together, she argued, those conditions leave room for easing once the Fed is confident that inflation is continuing to normalize and the labor market is not materially worsening.
Guenther described the U.S. labor market as one characterized by low hiring, low firing, and low turnover. Much of the cooling from the overheated market of 2022 has come through fewer job openings rather than outright layoffs. But, she cautioned, that means there may be less cushion left in job openings if labor demand weakens further. Any further reduction in demand for labor, she said, “probably has to come out of jobs themselves. That’s why you might still see a pickup in the unemployment rate, even though the growth picture looks good. There’s this fragility in the system, and that’s the fragility the Fed is trying to avoid.”
The outcome the Fed is trying to avoid, she said, is a self-reinforcing downward spiral in which workers are being laid off and spending less money, which results in companies making less money and having to reduce hiring or even lay people off. That vulnerability is one reason Goldman believes the Fed will remain attentive to downside risks on the jobs front even with inflation still above target.
On the interest-rate front, Guenther expects a steady re-steepening of the yield curve, with the front end moving lower over time as the Fed cuts its federal funds target while the long end remains relatively sticky. She pointed to persistent deficit and funding concerns, still-firm economic growth, and above-target inflation as reasons longer-term yields may stay elevated even if short-term rates eventually move down, perhaps with two federal funds rate cuts from the Fed sometime between now and next year. For fixed-income investors, she said, that leaves bonds looking attractive, especially at the front end of the curve, while still leaving room to hedge if the economy weakens materially.
Against that backdrop, Guenther characterized the outlook for the credit markets—investment grade, high yield, and securitized—as stable. At the same time, she noted that spreads are already tight enough that there is little room for further compression. The more important point, she said, is that fixed income still offers a compelling carry opportunity in a market where investors are being paid meaningfully to own bonds.
“If you look at the two-year (Treasury note) today at 3.8%, yields would need to back up another 200 basis points to lose money at the front end of the curve,” she said. “At the 10-year at 4.3%, yields would need to back up about 50 basis points to lose money. So, the return asymmetry looks really attractive in bonds, especially at the front end.”
After laying out that macro and rates framework, Guenther turned to the other theme she said would likely dominate investor attention if geopolitics were not doing so already: artificial intelligence (AI). Here, too, her message was mostly positive. AI, she said, has the potential to lift productivity, reshape the labor market, and create substantial economic value—but over a period of years rather than quarters. Goldman Sachs Asset Management estimates that AI could boost productivity 15% over the next 10 years or so and add about $7 trillion to global GDP annually.
Thus far, Guenther added, there is little evidence of broad, AI-driven job destruction. Citing research by the outsourcing firm Challenger, Gray & Christmas, she said only about 7% of U.S. job losses since 2024 were attributable to AI or AI-enabled technological change. In fact, Goldman Sachs’ own labor economists estimate that only about 7% of jobs are highly exposed to and likely to be displaced by AI, while 63% are more likely to be complemented by AI and 30% are unlikely to be materially affected.
In summary, Guenther’s message was that the economy, financial markets, and policy backdrop still provide reasons for investor confidence even at a time of significant geopolitical stress. While uncertainty remains high, the underlying outlook for economic growth, interest rates, and fixed income is more positive than headlines alone might suggest.