Goldman Sachs chief economist Jan Hatzius published "Global Views: They're Not Hiking"1 on August 16, 2026, and the title says everything. Across eight tightly argued points, Hatzius maps a US economy slowing beneath the surface, a Fed that has no credible path to rate hikes, and a global backdrop that is more nuanced than the headlines suggest. The message for advisors and investors: stop pricing in hikes that are not coming.
The Consumer Is Fading
The drop in US retail sales in July is not just noise. Hatzius acknowledges the Amazon Prime distortion but frames the broader trend plainly: "the strength of real consumer spending in the spring was the temporary byproduct of the tax refund surge, and that real spending growth will slow to 1-1.5% in H2 as real cash flow stagnates." The risks skew lower still. The Strait of Hormuz remains closed, and any renewed spike in gasoline prices would fall disproportionately on lower and middle-income households. Strong business investment and lagged equity wealth effects offer some offset, Hatzius notes, but GDP growth will likely remain "slightly below potential."
The Labor Market Is Weaker Than It Looks
The unemployment rate fell from 4.5% in December to 4.1% in July, but Hatzius argues this decline "deserves less weight than it normally would because it has been driven by lower labor force participation, not higher employment." Underlying trend job growth has slowed to just 5,000 per month, well below the 50,000 breakeven Goldman estimates. Continued weakness in wage growth reinforces the point. The labor market is not tightening.
Inflation Is Improving, and the Noise Will Clear
Core PCE is tracking at 0.20% for July, but Hatzius breaks down the composition carefully. More than half the July gain stems from portfolio management services, a category he describes as "poorly measured and defined," noting that most people do not view paying a constant percentage fee on a growing portfolio as a price increase. That component faces a large downward revision at the end of September. Tariff effects, software and accessories pricing, and energy costs are all expected to fade. Goldman's base case holds: core PCE inflation falls to near 2% in 2027.
The Fed Is Not Hiking
This is the report's central claim, and Hatzius builds toward it methodically. Although nine of eighteen FOMC participants projected hikes in their June dot submissions, Hatzius estimated at the time that only four to five voting members fell into that camp. Since then, after two consecutive months of softer jobs and inflation prints, the case for a September hike has essentially collapsed. "After two months of materially softer jobs and inflation data, it's hard to see any of the doves shifting toward hikes." Under Goldman's baseline, the inflation picture is more likely to improve further than deteriorate. Market pricing for the funds rate, in Hatzius's view, remains too hawkish.
Europe: Equities Outrun the Economy
The note closes its global sweep with a constructive view on European equities, including UK stocks. Hatzius offers a structurally important observation: the sectors dragging on European GDP, such as autos, represent only 1% of market capitalization. Meanwhile, higher oil prices that hurt European consumers benefit European stocks through the large index weight of energy producers. Stoxx 600 earnings per share grew 14% in the first half of 2026, against nominal GDP growth of just 3.3% and real growth of 0.7%. The Stoxx 600 has outperformed the S&P 500 over the past 18 months. European valuations remain reasonable even after re-rating.
China and Global Oil: The Tail Risks
Hatzius argues the RMB is at least 20% undervalued and that China's ongoing producer price deflation widens that gap every year without compensating nominal appreciation. He invokes the classic Swan diagram solution: exchange rate appreciation paired with a domestic demand boost, such as an expanded social safety net. On oil, global inventories are falling at roughly 3.1 million barrels per day and have dropped 509 million barrels since March. If the Strait of Hormuz does not reopen, inventories will reach all-time lows in data going back to 2018.
Five Key Takeaways for Advisors and Investors
1. Rate hike risk for September is effectively off the table; market pricing that embeds hike probability represents an opportunity on the rates side.
2. US consumer spending is decelerating structurally, not cyclically, as the tax refund boost fades and real cash flow stagnates.
3. Core inflation readings will improve materially as portfolio management fees, tariff effects, and energy costs roll off through 2026 and into 2027.
4. European equities deserve a closer look; earnings momentum has decoupled meaningfully from weak GDP, and valuations remain attractive relative to the US.
5. The Strait of Hormuz closure is the single most acute tail risk in global markets, with oil inventory levels approaching historic lows and direct downstream effects on inflation and consumer purchasing power.
Footnote:
1 Hatzius, Jan. "Global Views: They're Not Hiking." Goldman Sachs Global Investment Research, 16 Aug. 2026, https://www.gspublishing.com/content/research/en/reports/2026/08/16/0fbaa275-d1cf-4a85-b2fb-c1ebbdb1a811.pdf.
