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Sunday, December 16, 2018
Notations From the Grid (Special Edition): On the Eve of #2019 **Briefings Courtesy Goldman Sachs**
How to Invest in 2019: GSAM's Investment Outlook
The aging economic expansion is likely to continue through next year with some possible advantages for investors after a challenging 2018, according to Goldman Sachs Asset Management's (GSAM) 2019 investment outlook, A Better Deal. For investors, late-cycle fears will continue to drive episodic volatility and drawdowns, creating opportunities to invest at attractive valuations. In terms of market views, the GSAM team prefers equities over corporate credit, credit over interest rates and emerging markets over developed markets. "End-of-cycle signs -- including contracting corporate profit margins, excessive central bank tightening and systemic financial imbalances -- are not evident and we think we are unlikely to see them through the first half of 2019, though the risks will rise towards the end of the year," says Neill Nuttall, GSAM's co-chief investment officer of the Global Portfolio Solutions Group. "While there is enormous uncertainty around the length of the cycle, we feel it is too early to start to take down risk to prepare for the end of the cycle."
With policymakers in easing mode after 2018's sharp slowdown, further deceleration in China's economy should be modest next year, according to Goldman Sachs Research economists. They forecast China's GDP growth will slow to 6.2% from 6.6% as the nation looks to balance mounting debt with the risk of another growth slide. Fiscal policy will be the preferred tool for stabilizing growth, with an emphasis on greater infrastructure investment. An escalation in the US-China trade dispute is the main risk to the forecast, but for now, the drag on Chinese growth from tariffs looks manageable.
For technology companies, 2018 was a very good year, representing one of the industry's biggest for IPOs since 2000, according to the Goldman Sachs Investment Banking Division. In particular, large global IPOs, especially from China, dominated the scene as investors looked for growth opportunities, says Nick Giovanni, co-head of Global Technology Investment Banking. What's the outlook for 2019? "Assuming market conditions continue to be supportive, we expect a large group of companies will access the public markets for capital, brand visibility, and liquidity for employees, founders and early investors," says William Connolly, head of Investment Banking's Technology Equity Capital Markets group.
Talks at GS: Michael Beschloss on Leadership, War and the American Presidency
Above (L to R): Presidential historian Michael Beschloss and John F.W. Rogers of Goldman SachsIn his new, bestselling book, Presidents of War, historian Michael Beschloss explores how war has fundamentally redefined the power of the American presidency and shaped the people who have led the nation. During a recent episode of Talks at GS moderated by John. F. W. Rogers, chief of staff of Goldman Sachs, Beschloss said, "I began with the idea that only eight or nine people in American history have had this experience of sending large numbers of Americans to risk their lives, put their lives in harm's way, and what did they have in common?" He continued, "Every single one of them became more religious in the course of being war leaders. Abraham Lincoln, for instance, when he was a young man in Illinois was a skeptic, thought of as an agnostic. But when he was late in the Civil War, he was visited by an old friend from Illinois who found Lincoln reading the Bible and was astounded. And Lincoln said, 'I can't imagine how any war president could have this experience of causing the deaths of so many people without finding some kind of spiritual comfort.'"