Fed losing forecast edge is market game-changer, says Goldman Sachs Group

Risky assets are reacting more strongly to hawkish monetary shocks from the Federal Reserve in recent years, according to Goldman Sachs Group. The reason, ironically, is that the Fed is losing its forecasting edge.

The Fed’s relative predictive advantage versus private economists has declined in recent years as the higher quality and quantity of forecasters makes it harder for anyone, including Fed staff, to beat the “wisdom of the crowd,” Goldman economists including Jan Hatzius and David Choi wrote in a note April 20. It also means that after hawkish monetary shocks, such as a surprise rate hike or