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Top Market Themes for 2016 – Goldman Sachs

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 30, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Goldman Sachs, suggests the main market themes for the year 2016 as we enter the New Year.

    Key Quotes

    “Growth has consistently disappointed over the past several years, but this has not prevented risky assets from increasing substantially. In 2016, we expect activity to continue to expand in the advanced economies, led mostly by the consumer. But high valuations and rising rates, especially in the US, will present challenges for risky assets. As a result, investment opportunities next year will be centred around rotation between markets and across sectors. In short: more alpha than beta.”

    “Over 2016 we expect inflation to realize above market expectations, which are overly conservative in our view. This will dictate the pace of increases in nominal bond yields. Our central forecast calls for more divergence in short rates across the G10 (as the Fed hikes and the ECB and BoJ ease), higher bond yields across the board, and steeper curves. By contrast, we are constructive on corporate credit spreads over the balance of the year.”

    “In FX markets, our strongest view in 2016 is further Dollar strength against the G10 currencies. Valuations of EM FX have cheapened very substantially over the past three years. In the coming year, we expect EM currencies to be stable on a trade-weighted basis, particularly where imbalances have corrected.”

    “In commodities, risks to prices for energy and industrial metals are skewed to the downside in the near term. But, looking at the balance of 2016 our strongest theme remains “lower for longer”. We prefer exposure to commodities related to operational expenditure (such as oil) over commodities tied to capital expenditure (such as copper).”
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