With 2012 wrapping up, investors are beginning to prepare themselves for 2013.
David Kostin, Goldman's Chief U.S. Equity Strategist, has already called for the S&P 500 to end 2013 at 1,575.
Goldman Sachs' Economics Research team led by Dominic Wilson just published their 18-page report on Top Ten Market Themes For 2013, the big stories that will dominate the markets.
Overall, the team expects global growth to pick up in the second half of the year aided by the U.S. energy boom. Developed market economies have lots of room to grow. Emerging markets also have room to grow, but will have less flexibility as inflation risks intensify.
We distilled the report and pulled the key points and quotes.
1. "Global growth: A ‘hump’ to get over, then a clear road ahead"
Growth will be weak in early 2013 with increased fiscal restraint. Spanish economic risks and Italian political risks will ease in the second half of the year. And there will be "room to grow" thanks to output gaps. Looser energy supplies will also help.
"The biggest challenge from a markets perspective is that we see risks to growth concentrated early in the year, with Q1 likely to show a step-down in growth globally."
Source: Goldman Sachs
2. "More unconventional easing in the G4"
Interest rates will stay ultra-low in the world's largest economies. "Fed to move towards macro-based criteria; ECB to conduct private asset purchases."
"However, the most hotly debated shift currently is whether the BoJ will make a more convincing attempt at easing. ... And while we do expect incremental progress, our central case is not for a quantum leap in BoJ policy, particularly in the near term."
Source: Goldman Sachs
3. "Termites eat away at the foundations of the ‘search for yield’"
US Treasury yields will rise modestly. But investors will be driven toward corporate bonds as they look for yield.
"Increased risk that easy credit will lead to corporate re-leveraging ... [E]xcluding peripheral Europe, corporate credit quality (as measured by debt-to-earnings measures) remains good in most markets, and this should continue to support the fundamental risk profile of most credit portfolios."
Source: Goldman Sachs
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