Daily Management Review

Goldman Sachs Analyst Believes The World Is Entering A New Super Cycle


According to Peter Oppenheimer, head of macro research in Europe at Goldman Sachs, the world economy is entering a new "super cycle," driven by artificial intelligence and decarbonisation.
“We are moving clearly into a different super cycle,” he told CNBC on Monday.
Super cycles are typically defined as extended periods of economic boom, which are frequently accompanied by rising GDP, strong demand for goods, resulting in higher prices and high levels of employment.
The world economy's most recent important super cycle began in the early 1980s, according to Oppenheimer, who was discussing topics from his recently published book "Any Happy Returns."
He said that this was marked by a peak in interest rates and inflation, followed by decades of dropping capital costs, inflation, and rates, as well as economic measures such as deregulation and privatisation. Meanwhile, geopolitical concerns decreased, and globalisation strengthened, according to Oppenheimer.
However, not all of these elements are expected to remain unchanged, he added.
“We’re not likely to see interest rates trending down as aggressively over the next decade or so, we’re seeing some pushback to globalization and, of course, we’re seeing increased geopolitical tensions as well.”
The Russia-Ukraine war, trade tensions between the United States and China, and the Israel-Hamas conflict, which is causing alarm in the Middle East, are just a few of the geopolitical themes that markets have been concerned about in recent months and years.
While current economic events should theoretically limit the speed of financial returns, Oppenheimer believes that artificial intelligence and decarbonisation may have a favourable impact.
AI is still in its early phases, he added, but when it is utilised more as the foundation for new products and services, he believes it will have a "positive effect" on stocks. 
The hot topic of AI and productivity, which has frequently coincided with debates and concerns about human employment replacement or transformation, is expected to have an impact on the economy.
“The second thing is [that] we haven’t yet seen, and I think we’re relatively positive that we will see, [is] an improvement in productivity on the back of the applications of AI which could be positive for growth and of course for margins,” Oppenheimer said.
Despite the fact that AI and decarbonisation are relatively new concepts, Oppenheimer noted historical connections.
One of the most notable historical periods is the early 1970s and early 1980s, which he described as "not so dissimilar" to present trends. Elevated inflation and interest rates were likely greater fundamental difficulties than they are now, he said, but elements such as rising geopolitical tensions, higher taxes, and increased regulation appear to be similar.
Oppenheimer emphasised that present developments might also be viewed as a reflection of changes that occurred much earlier in history.
“Because of this tremendous twin shock that we’re likely to see, positive shock of technological innovation at a very rapid pace together with restructuring of economies to move towards decarbonization, I think that’s a period that’s more akin really to what we saw in the late 19th century,” he said.
This historical period is defined by modernization and industrialization, which are fuelled by infrastructure and technological improvements, as well as large increases in production.
Oppenheimer emphasised that these historical connections can serve as lessons for the future.
“Looking back in time, cycles and structural breaks do repeat themselves but never in exactly the same way. And I think we need to sort of learn from history what are the inferences that we can look at in order to position best for the sort of environment we’re moving into.”