6 Top Goldman Sachs Trades for 2014
NEW YORK (TheStreet) -- With 2014 right around the corner, Goldman Sachs highlights six top trading ideas for the coming year, all gleaned from its senior analysts.
The bank is forecasting stronger U.S. growth, a decline in the so-called "fiscal drag," weaker commodity prices, and a reduction in global risk, beginning with the euro zone. Here's their take on 2014:
The first Goldman Sachs slide illustrates the bank's distribution of growth forecasts for 2014.
The graph shows consensus economic forecasts punctuated by Goldman Sachs' projections, which show up as red dots. Goldman's projection for the U.S. and the United Kingdom is higher than the consensus and represents an improvement over the pace of growth for 2013. For Japan, and also partly for Germany and the European countries, Goldman's numbers are much closer to the consensus.
Goldman's confidence is based on three, largely independent factors:
The first is based on expectations for a decline in the fiscal drag over the balance of 2014 and 2015 relative to the experience of the last several years. This fiscal drag is estimated to be 100 to 125 basis points for the U.S. and 50 to 75 basis points for the euro zone.
Secondly, Goldman's analysis points to a more abundant supply of key industrial commodities. The third factor is Goldman Sachs' expectation of a sustained decline in systemic risks emanating from the euro area. This reflects the central role played by the European Central Bank and the European Stability Mechanism (ESM) in providing funding to peripheral banks and sovereigns alongside the prospect of a banking union.
"The one thing that I would say however is that the agreement around our views, more than in recent years, is pretty high," said London-based Francesco Garzarelli during an investor presentation this week.On the dimension of monetary policy, Goldman Sachs expects policy rates to remain very low, stretched out into 2017.
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