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Goldman Sachs Maps Out Its Top Ten Market Themes for 2017

They're heavily influenced by President-elect Trump.

It's not even Thanksgiving yet, but Goldman Sachs Group Inc. is already preparing for 2017. In a note to clients on Thursday, a team led by Chief Credit Strategist Charles Himmelberg released its top ten market themes for next year.

"High growth, higher risk, slightly higher returns," is how the strategists view the year ahead — and it's clear that their outlook has been heavily influenced by the pending regime change in Washington, D.C.

Here's a brief summary of each of the ten themes Goldman sees as forming the backdrop for investing in 2017.
Expected returns: only slightly higher

Relative to its 2016 forecasts, the team says owners of financial assets can reasonably able to expect more upside — but stress that these returns will still likely remain low.

"The best improvement in the opportunity in global equities is in Asia ex-Japan, where we forecast returns of 12.5 percent (versus 3.8 percent for 2016)," the strategists write. "At the other end of the equity spectrum, in Japan we are forecasting declines of -3.7 percent on the Topix (versus 5.2 percent for 2016)."
U.S. fiscal policy: a pro-growth agenda

President-elect Donald Trump's focus on infrastructure spending during his victory speech on Nov. 9 — rather than trade protectionism or immigration restrictions — catalyzed the risk-on sentiment that's pervaded markets, according to Himmelberg.

"Markets are starved for growth. This is plainly visible in the eagerness with which markets seized on Trump’s growth-focused message," he writes. "It is also visible in the speed with which the market’s narrative on the economic outlook under Trump has shifted from ‘uncertainty’ to ‘growth.'"

Fiscal stimulus in the U.S. will help reflate the economy, and stands a good chance of passing through Congress, the team reckons.
U.S. trade policy: concerns are likely overdone

Goldman doesn't see an imminent trade war on the horizon, and expects any re-negotiation of agreements currently in place (like NAFTA) to focus...Read more...

Source: bloomberg.com