Edward Conard

Top Ten New York Times Bestselling Author

  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
Upside of Inequality Oxford Unintended Consequences

AI Summary. Analysts modeling six long-term macro scenarios project that equity returns fall below their long-run average in every case except one combining strong growth with an artificial intelligence boom and rising return on equity. Bond returns are also projected to run somewhat below average, offering little buffer in adverse, inflation-prone scenarios.

Christian Mueller-Glissmann, Andrea Ferrario, Alessandro Giglio, Giovanni Ferrannini, et al. Goldman Sachs
Date Posted:

Goldman models six scenarios, from AI best plus “Goldilocks” (steady growth, tame 2% inflation, rising profits) to stagflation. Equities beat their post-1950 average only in the best case; elsewhere they lag, and inflation risk blunts bonds’ protection.

Do long-term macro scenarios point to below-average equity and bond returns?

Core argument: Across six long-term scenarios derived from a macro-based return framework, equity returns fall below the long-run average in all but "Goldilocks + AI boom," which assumes continued return-on-equity expansion and strong GDP growth.

The outlook for balanced portfolios in the coming years is closely linked to the AI boom and risks from inflation. We derive new scenarios using our macro-based long-term return framework: (1) Goldilocks + AI boom, with continued ROE expansion and strong GDP growth, (2) Goldilocks, but with stable ROE, (3) Reflation, with strong nominal growth but lower ROE and (4) Goldilocks + AI bust, in which ROE declines and GDP growth weakens, (5) Stagnation, with weaker growth but ROE somewhat in-line with its 5-year average and (6) stagflation, similar to the 1970s. In all scenarios except 'Goldilocks + AI boom', equity returns are below the long-run average. Equity risk premia for both the 'normal' Goldilocks backdrop and for Reflation are near the long-run average. However, for the more negative scenarios equity returns and equity risk premia are much worse. But bond returns are also somewhat below average in most scenarios and unlikely to provide much of a large buffer in those adverse scenarios, especially those with inflation risk.

Takeaways by Macro Roundup® AI

  1. Across six long-term scenarios derived from a macro-based return framework, equity returns fall below the long-run average in all but "Goldilocks + AI boom," which assumes continued return-on-equity expansion and strong GDP growth.
  2. Equity risk premia sit near the long-run average in the "normal" Goldilocks and Reflation scenarios, but equity returns and risk premia are much worse in the more negative scenarios, including AI bust, stagnation, and 1970s-style stagflation.
  3. Bond returns are somewhat below average in most of the scenarios and are unlikely to provide much of a buffer in adverse outcomes, particularly those carrying inflation risk.

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