Despite an election looming in 2020, a new Goldman Sachs economics research note tells clients not to expect new fiscal stimulus in the new year.
The investment bank said it does not expect the Fed to cut rates again in 2020 after three rate cuts in 2019. The fed last cut rates in October and also indicated the moves to ease policy could be nearing a pause.
"Fed officials appear to have settled on a consensus that monetary policy is "in a good place," and the bar for a change in either direction over the next year appears high," the note said.
The only interesting monetary policy development Goldman anticipates next year is the conclusion of the Fed's framework review, at which the FOMC is expected to adopt an inflation target above 2% for expansions.
There is also a less than 20% chance for a recession next year, according to the bank's model, and Goldman continues to see little recession risk "despite the record age of the expansion." Goldman points to a healthy private sector that continues to run a financial surplus.
The unemployment rate is also expected to decline to 3.25%, which would mark the lowest rate since the Korean War, and wage growth will continue to increase next year, the economics research note said.
The U.S.-China trade war reached its peak earlier this month, according to the note, and Goldman said it does not expect the White House to impose an increase in tariff rates in 2020 because of the impending election. This trade war deescalation should help stabilize the economy.
"The fading growth drag from the trade war and the increasingly positive growth impulse from easier financial conditions should put the economy on a sturdier footing in 2020," the note said.