Goldman Sachs has released its predictions for 2017. The investment bank's chief credit strategist, Charles Himmelberg, believes that "economic growth will likely pick up versus the somewhat disappointing performance in 2016". Indeed, in recent months, "the growth rate of global GDP already appears to be realising at the top of the range".
He also thinks that president-elect Donald Trump "will take a far more practical approach to US trade policy" than his rhetoric suggests, while a promised fiscal stimulus in the US would provide "a welcome growth and reationary impulse".
On the monetary side, central banks will begin to focus on cutting "the cost of short-term bank credit", helping firms. As a result, Goldman expects "ination to gain momentum in 2017". And if concerns about US protectionism are "overdone" and Trump's fiscal policies result in "stronger US growth and ination alongside commodity price increases", emerging market assets "can prosper, especially equities".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Indeed, many emerging economies now "have stronger external balances... better valuations and more encouraging signs of an improving growth outlook" than they did earlier this year.
If that all sounds like a bit of a "Goldilocks" investment scenario (not too hot, not too cold, but just right) Himmelberg does acknowledge that there are still big downside risks. Trump is "highly unconventional and unpredictable" compared with a more typical president for a start, while "valuation levels for equities and especially bonds remain highly elevated". As a result, "expected returns remain low", with US stocks seen returning only 2.7% next year.
