Jan 25, 2022

Goldman Sachs Investment Strategy Group Outlook 2022: Piloting Through

By Goldman Sachs Investment Strategy Group

The Goldman Sachs Investment Strategy Group (ISG) recently released its annual Outlook. This year's edition, "Piloting Through," explores reasons to stay invested, and 2022’s global economic and financial market outlooks.


Setting the stage

2021 was a remarkable year for U.S. financial assets. U.S. equities returned an eye-popping 28.7%, extending their gains since the trough of the global financial crisis to 812%—an outperformance of more than 500 percentage points relative to non-U.S. developed and emerging market equities.

Goldman Sachs' Investment Strategy Group has consistently recommended clients stay invested in equities and strategically allocate a greater portion of their equity portfolios to U.S. stocks for the nearly 13 years that they have been writing these yearly Outlook reports. Yet such outsized returns have led clients and colleagues to ask whether we have finally reached a tipping point where the "stay invested" recommendation has reached the end of its shelf life and the time has arrived to underweight U.S. equities.

What's inside

In Section I of this report, ISG explains why they believe the recommendation to stay invested remains valid. They focus on valuations, the earnings outlook given the global economic backdrop and the absence of what some have termed "froth" or "irrational exuberance" in U.S. equities based on financial market flows and portfolio positioning.

They compare and contrast the current financial market backdrop to that of the dot-com bubble in order to address a frequently and not unreasonably asked question: are we at the precipice of another major downdraft, like the 49% peak-to-trough drop in equities between March 2000 and October 2002?

They then turn to one- and five-year expected returns and our more opportunistic tactical tilts. Section I concludes with the key risks to this outlook, including the pandemic, inflation, tightening of monetary policy, recession and high-impact geopolitical flare-ups.

This is followed by ISG's outlook for global economies in Section II and forecasts for global financial markets in Section III.

Access ISG's full views and investment recommendations in Outlook 2022: Piloting Through.

This material represents the views of the Investment Strategy Group (ISG) in the Consumer and Wealth Management Division of Goldman Sachs and is not a product of Goldman Sachs Global Investment Research (GIR). It is not research and is not intended as such. The views and opinions expressed by ISG may differ from those expressed by GIR, Goldman Sachs Asset Management, LP, or other departments or divisions of Goldman Sachs. Past performance is not indicative of future results which may vary.

This material has been approved for issue in the United Kingdom solely for the purposes of Section 21 of the Financial Services and Markets Act 2000 by GSI, Plumtree Court, 25 Shoe Lane, London, EC4A 4AU, United Kingdom; authorised by the Prudential Regulation Authority; and regulated by the Financial Conduct Authority and the Prudential Regulation Authority; by Goldman Sachs Canada, in connection with its distribution in Canada; in the United States by Goldman Sachs & Co. LLC Member FINRA/SIPC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in Japan by Goldman Sachs (Japan) Ltd; in Australia by Goldman Sachs Australia Pty Limited (ACN 092 589 770); in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198502165W); in Dubai by Goldman Sachs International, in Germany by Goldman Sachs Bank Europe SE; in Switzerland by Goldman Sachs Bank AG; in Spain by Goldman Sachs Bank Europe SE, Sucursal en España; in Italy by Goldman Sachs Bank Europe SE, Succursale Italia; and in France by Goldman Sachs Bank Europe SE Succursale de Paris.
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