Over the Horizon

Over the Horizon

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In search of investment peaks in a low-return environment.

Investment Strategy Group

Goldman Sachs Private Wealth Management

January 2013

Related video: Investment Outlook 2013

Over the last four years, we have been making the case that US preeminence relative to other economies is the single most important factor underlying our core allocation to US assets. As we began thinking about our 2013 Outlook, we decided to revisit that call in light of the remarkable performance of US assets since the trough of the financial crisis in early 2009. The question now is: have the factors that led to this performance changed?

The short answer is: yes, but for the better. US preeminence is not only still intact; it rests on a stronger foundation and is likely to be sustained for the foreseeable future. The past four years helped crystallize awareness of the key economic, institutional, human capital and geopolitical advantages the US enjoys over other economies. Meanwhile, persistent structural fault lines have put key developed and emerging market countries at a further disadvantage to the US.

Of course, the US faces its own fault line: its still-problematic fiscal profile. In this report, we evaluate the likelihood of a resolution.

We also affirm that there are intriguing investment opportunities outside the US. Fault lines in other countries are not fatal flaws. We point them out so that investors are aware of them, and can use them to allocate assets on a prudent and selective basis.

Importantly, we encourage investors to lower their return expectations across all asset classes over the next several years. We have, for the first time in our Outlook series, issued our return expectations for major asset classes for the next five years. It is our hope that comparing expected returns for these assets over the short and intermediate term will help our clients better balance their return objectives with their risk tolerances and investment horizons.

Goldman Sachs Private Wealth Management regularly publishes insight and commentary on investment and wealth management topics for our clients. To pursue a conversation on this topic, please contact a private wealth advisor.

The Investment Strategy Group is a part of the Investment Management Division of Goldman Sachs and is not a part of the Goldman Sachs Global Investment Research (GIR) Department. The views and opinions expressed by the Investment Strategy Group may differ from the views and opinions expressed by GIR or other departments or divisions of Goldman Sachs.

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