Nataly Kambur
In early December the financial experts of Goldman Sachs published their global economic outlook for the next 2 years. The forecast says the economic situation in Russia will be stable mostly on favorable oil prices (Urals –$100.b).
What awaits the world in 2012-2013? What should investors pay attention to? Let’s find it out:
About Goldman Sachs
Goldman Sachs is one of the world’s biggest commercial banks founded in 1869 by Markus Goldman. It is engaged in numerous services:
· Investment banking
· Securities
· Investing and lending
· Investment management
· Research
The bank runs the investment accounts owned by numerous investment and hedge funds as well as big-scale private investors.
The bank is also famous for its professional team of financial analysts, one of the world’s best.
Goldman Sachs is definitely influential. For example, some experts insist that the forecasts made by Goldman Sachs move oil prices instead of predicting them.
Moreover, Goldman Sachs acts as a financial advisor for corporations and governments.
Goldman Sachs: Latest Forecasts
The analytic team of Goldman Sachs has recently published its forecast for commodity and currency markets, thus confirming ’s forecasts, which suggested another major crisis (it was made in August 2011 and published by Market Leader, thus anticipating the behavior of central banks).
According to , these are the key points of the forecast:
Developed economies. The pace of economic growth will slow down dramatically. There will be more significant social spending cuts aimed at reducing budget deficits and public debts. As a result, there will be a sharp decline in lending services, which will cause considerable reduction in the banking sector of those countries.
Emerging economies will see lower inflation. The People’s Bank of China has already started the tendency by reducing the reserve requirements for commercial banks by 50 base points.
EU. In Dec 2011 – Q1 2012 the EU’s GDP is expected to decline by 0.5%. Scandinavian countries, Great Britain and some central and eastern regions of the EU will suffer from the slowdown. In 2013 the pace of economic growth will only grow by 0.7%. As a result, Europe will probably fall into recession.
Eurozone crisis: consequences. The eurozone crisis will keep affecting the global economy. Goldman Sachs has already lowered the forecast for the global GDP growth in 2012 down to 3.2%. There is still no efficient solution as the eurozone crisis keeps escalating. The eurozone debt will keep pressing Europe’s banking sector.
Global stock markets. The next 6 months will be bearish for stock indexes around the world, including Topix, Europe 600, Stoxx and MSCI AC. However, S&P 500 won’t see major changes. European stocks will grow more volatile. In early 2012 they may lose up to 16% of their value. But in late 2012 they will recover.
The Department of Portfolio Investments of :
“We assume that entering the market at the moment is risky. Goldman Sachs anticipates a slowdown in Q1 2012 due to the consequences of the eurozone crisis. US macroeconomic stats indicate a slight recovery, due to which we may see a “New Year Rally”. Resolving the eurozone crisis is the focus. If the risks are lowered, there will be some recovery. It would be safer to sale starting from 1220 -1150 because if there a negative scenario, the US stock market may look overvalued. As a result, we will see stock indexes falling down.”
Asia. In 2012 Asian stocks (excluding Japan) will gain up to 14%. Low-priced Asian stocks and China’s stunning growth will make net income-per-share grow by 5.6% in 2012 and by 12% in 2013.
Public debts. Easy money-and-credit policies and moderate inflation will make the 10-year US T-bond yield increase by 65% by 2014. Germany and Great Britain will follow the US.
US Dollar. It will decline as global investors will expand their currency portfolios. The Chinese Yuan, the British Pound and the Mexican Peso will strengthen against USD.
Crude oil. Oil and gasoline prices will grow on numerous problems connected with energy carrier production. The real price of oil is restrained by governments. However, oil will overcome the resistance and may even hit a new record.
According to , technically, oil is currently around $100/b, a major psychological level. If the price succeeds in consolidating above $100/b, it will get a chance to rally up to $110/b. Otherwise, the closest support is around $90/b.
Should we trust Goldman Sachs?
To answer this question, let’s consider the bank’s income stats:
In 1995 the bank’s financial advice for 26 major deals let it make a quick gain on $15.6B, thus making the bank a leading global-scale financial advisor. In 1999 Goldman Sachs concluded the biggest amount of deals in the M&A market, turning over $800B in assets. Currently the company accounts for 20-40% of global financial services, being one of the world’s 3 leading banks.
The data suggest that investors trust Goldman Sachs by letting it manage hundreds of billions of dollars. The level of trust is very high. So, let’s hope that only the positive side of the forecast will come true.
As for Goldman’s stock, the Department of Portfolio Investments of reports that after a prolonged downtrend (since early 2011) the stock has finally found the bottom around $90 per share and is currently recovering against it. Risky investors can start buying the stock. Others should wait till the price returns to $90 and buy the stock when it starts showing positive signs once again.
Expected targets: $130-$140. Stop loss is necessary in case the price consolidates below $90 on corporate or systemic risks.
Forecast:
Market Leader and would appreciate if you could participate in a survey. Please, visit the Academy’s forum for traders and investors and answer the following question:
Will the global economy really fall into recession?
Nataly Kambur
