2012 Issues for Investors

Sharmin Mossavar-Rahmani, chief investment officer for Goldman Sachs Private Wealth Management, examines the cyclical and structural issues that will shape the global economy in 2012.

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The key question on our clients’ minds is whether 2012 will be better or worse than 2011.

- Sharmin Mossavar-Rahmani
Managing Director and Chief Investment Officer of Private Wealth Management

  • Sharmin Mossavar Rahmani

    Sharmin Mossavar-Rahmani

    Managing Director, Chief Investment Officer of Private Wealth Management

As we formulate our economic and investment outlook for 2012, we are struck by the tremendous amount of uncertainty in the global economy.

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Three and a half years have passed since the onset of the financial and economic crisis of 2008, yet for many investors, the storm feels as if it has barely diminished.

It is useful to examine and categorize uncertainties in the economy, so they may be better understood and addressed. Current concerns fall into two categories: cyclical concerns that focus on near-term economic growth prospects and structural concerns that focus on long-term sustainability of existing political or economic frameworks in various countries.

Cyclical concerns cover a broad spectrum of issues; they range from a “lost decade of growth” in the US as a result of the financial crisis of 2008, to a deep recession in the Eurozone as a result of austerity measures, to dimming prospects for Japan after the recent triple whammy of earthquake, tsunami and nuclear accident. They also include worries about a hard landing in China as a result of deterioration in the real estate sector and slower growth in its export-destination countries.

Structural concerns include the long-term fiscal profile of the US in the face of political gridlock, the very survival of the Eurozone as a monetary union in the absence of real fiscal and political union, and the ability of China to rebalance an investment-led and export-led economy to a more diversified consumer-oriented economy.