See all our year-ahead forecasts in one place. Visit the page.
Our Top Ten Themes for 2018:
Global Growth:
Stable and Synchronized
1.
DM Monetary Policy:
No Motive for Murder
2.
Drawdown Risk:
Bear-Market Warning Signs
3.
Emerging Markets:
More Room for Growth
4.
China:
A Well-Managed Slowdown
5.
Global FX:
Soggy Dollar
6.
US Policy Risks:
If It Rains It May Pour
7.
Bond Term Premia:
Gradual Normalization
8.
European Risk:
Preparing for a Post-Draghi Euro area
9.
Late-Cycle Imbalances:
Illiquidity Is the New Leverage
10.
Charles P. Himmelberg+1(917)343-3218|
charles.himmelberg@gsGoldman Sachs & Co. LLC
Francesco Garzarelli+44(20)7774-5078|
francesco.garzarelli@gsGoldman Sachs International
Silvia Ardagna+44(20)7051-0584|
silvia.ardagna@gsGoldman Sachs International
Kenneth Ho+852-2978-7468| kenneth.ho@gs
Goldman Sachs (Asia) L.L.C.
Lot Karoui+1(917)343-1548| lot.karoui@gs
Goldman Sachs & Co. LLC
Caesar Maasry+1(212)902-8763|
caesar.maasry@gsGoldman Sachs & Co. LLC
Christian Mueller-Glissmann,
CFA+44(20)7774-1714| christian.mueller-
glissmann@gsGoldman Sachs International
Zach Pandl+1(212)902-5699| zach.pandl@gs
Goldman Sachs & Co. LLC
Kamakshya Trivedi+44(20)7051-4005|
kamakshya.trivedi@gsGoldman Sachs International
Global Markets Analyst
Top Ten Market Themes for 2018: Late-Cycle Optimism
16 November 2017|9:22AM EST
Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certication and other important disclosures, see the Disclosure Appendix, or go to
gs/research/hedge.html.
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Top 10 Market Themes for 2018: Late-Cycle Optimism
We are late-cycle optimists. With US equity indices at record highs and 10-year US
Treasury yields only modestly off their all-time lows, we expect investors will be focused
on downside risks as they enter 2018. We have a lot of sympathy for such concerns, but
we see little risk that the number one catalyst for a market correction ¨C namely
recession ¨C is likely to materialize in 2018. While, chronologically, we are late in the
business cycle, we see good reason to think this expansion can extend for longer.
It usually pays to worry about recession risk during late-cycle hiking cyclesˉ. When
central banks are hiking rates to combat late-cycle inationary pressures, recessions
often happen. But this time may be different. In particular, given the weakness of
ination and anchoring of ination expectations in most developed economies, policy
makers today have less clear motives to tighten monetary policy as aggressively or
pre-emptively. Indeed, we expect the tightening of monetary policy to continue at a
gradual pace by historical standards. This bodes well for the length of the current
expansion.
Caution is nonetheless warranted. Market corrections
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