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Investment Ideas 2022: Explore three key themes dominating markets where investors might uncover potential opportunities. Read More

   

INVESTMENT IDEAS FALL 2022

Investment Themes

 

Change of Season

2022 was expected to be a year of change. It has delivered on that expectation. Investors and policymakers are suddenly dealing with challenges that have been dormant for decades. The highest inflation in over 40 years—driven by supply chain disruptions, soaring energy prices and tight labor markets—is colliding with the prospect of slower growth. At the same time, geopolitical instability tied to the war between Russia and Ukraine has increased polarization among countries, which could affect trade flows and add to shorter- and longer-term price pressures. 

 

Nearly all assets looked vulnerable in the first half of the year as policy tightening pushed equities into bear market territory and caused yields across the US Treasury curve to climb at their fastest pace in decades. Summer provided some respite as economic data improved amid hopes that inflation might be peaking. But those hopes faded after Federal Reserve Chairman Jerome Powell told the Jackson Hole Economic Policy Symposium in late August that the US central bank would continue to raise interest rates until inflation is under control—following through with its third consecutive 0.75 percentage-point hike in September—and acknowledged that a restrictive policy stance may be required for some time. As we head toward the end of the year, developed-market equity indices remain on track for their worst calendar-year performance since 2008.

 

We believe that real-time uncertainty about current economic conditions and policy actions will likely keep market volatility high, and investors will remain focused on whether central banks can tame inflation without triggering a global recession. Fortunately, economic and corporate fundamentals remain strong, as reflected in tight labor markets and healthy balance sheet positions. This means that any future signs that inflation is peaking may spark a shift in policy direction and improve market sentiment. With an active approach to portfolio construction that includes both public and private assets, we believe it is possible to uncover attractive sources of alpha in this environment. 

 

In this edition of Investment Ideas, we focus on three key themes dominating markets—high inflation, rates and recession risk, and a changing world order—and consider where investors might uncover potential opportunities.

 

 

Read our investment ideas for each theme:

Investment Ideas Fall 2022

Explore all of the themes in one place.

Contact us to discuss fall themes and opportunities.

Glossary

BBB credit ratings indicate the default expectations are low at that time.

Green Bond is a fixed-income instrument designed specifically to support specific climate-related or environmental projects. 

Net Zero refers to a state in which the greenhouse gases going into the atmosphere are balanced by removal out of the atmosphere. 

Capex is a capital expenditure

S&P 500 Index is the Standard & Poor’s 500 Composite Stock Prices Index of 500 stocks, an unmanaged index of common stock prices.

 

Risk Considerations

All investing is subject to risk, including the possible loss of the money you invest. 

Equity securities are more volatile than bonds and subject to greater risks. Dividends are not guaranteed and a company’s future ability to pay dividends may be limited.  

Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk.   

Investments in foreign securities entail special risks such as currency, political, economic, and market risks. These risks are heightened in emerging markets. 

Investments in commodities may be affected by changes in overall market movements, commodity index volatility, changes in interest rates or factors affecting a particular industry or commodity. 

High-yield, lower-rated securities involve greater price volatility and present greater credit risks than higher-rated fixed income securities. 

The currency market affords investors a substantial degree of leverage. This leverage presents the potential for substantial profits but also entails a high degree of risk including the risk that losses may be similarly substantial. Such transactions are considered suitable only for investors who are experienced in transactions of that kind. Currency fluctuations will also affect the value of an investment. 

Private equity investments are speculative, highly illiquid, involve a high degree of risk, have high fees and expenses that could reduce returns, and subject to the possibility of partial or total loss of fund capital; they are, therefore, intended for experienced and sophisticated long-term investors who can accept such risks. 

Alternative investing is not suitable for all investors and liquid alternatives are not riskless investments, so investors can lose money.

Alternative investments are suitable only for sophisticated investors for whom such investments do not constitute a complete investment program and who fully understand and are willing to assume the risks involved in. Alternative Investments. Alternative Investments by their nature, involve a substantial degree of risk, including the risk of total loss of an investor’s capital. 

The value of securities issued by technology and technology-related companies may be adversely affected by intense market volatility, aggressive competition and pricing, consumer preferences, short product cycles, lack of commercial success for new products, product obsolescence or incompatibility, government regulation and excessive investor optimism or pessimism, among other factors. 

Real estate investments are speculative and illiquid, involve a high degree of risk and have high fees and expenses that could reduce returns. These risks include, but are not limited to, fluctuations in the real estate markets, the financial conditions of tenants, changes in building, environmental, zoning and other laws, changes in real property tax rates or the assessed values of Partnership Investments, changes in interest rates and the availability or terms of debt financing, changes in operating costs, risks due to dependence on cash flow, environmental liabilities, uninsured casualties, unavailability of or increased cost of certain types of insurance coverage, fluctuations in energy prices, and other factors, such as an outbreak or escalation of major hostilities, declarations of war, terrorist actions or other substantial national or international calamities or emergencies. The possibility of partial or total loss of an investment vehicle’s capital exists, and prospective investors should not invest unless they can readily bear the consequences of such loss. 

Further, some real estate investments may require development or redevelopment, which carries additional risks relating to the availability and timely receipt of zoning and other regulatory approvals, the cost and timely completion of construction, and the availability of permanent financing on favorable terms. Real estate investments will be highly illiquid and will not have market quotations. As a result, the valuation of real estate investments involves uncertainty and may be based on assumptions. Accordingly, there can be no assurance that the appraised value of a real estate investment will be accurate or further, that the appraised value would in fact be realized on the eventual disposition of such investment.  In addition, real estate assets may be highly leveraged, which leverage could have significant adverse consequences to the assets and therefore an investment vehicle. In particular, an investment vehicle will lose its investment in a leveraged asset more quickly than a non-leveraged asset if the asset declines in value. You should understand fully the risks associated with the use of leverage before making an investment in a real estate investment vehicle. 

Investments in real estate companies, including REITs or similar structures are subject to volatility and additional risk, including loss in value due to poor management, lowered credit ratings and other factors. 

Hedge funds and other private investment funds (collectively, “Alternative Investments”) are subject to less regulation than other types of pooled investment vehicles such as mutual funds. Alternative Investments may impose significant fees, including incentive fees that are based upon a percentage of the realized and unrealized gains and an individual’s net returns may differ significantly from actual returns. Such fees may offset all or a significant portion of such Alternative Investment’s trading profits. Alternative Investments are not required to provide periodic pricing or valuation information. Investors may have limited rights with respect to their investments, including limited voting rights and participation in the management of such Alternative Investments. 

Alternative Investments often engage in leverage and other investment practices that are extremely speculative and involve a high degree of risk. Such practices may increase the volatility of performance and the risk of investment loss, including the loss of the entire amount that is invested. There may be conflicts of interest relating to the Alternative Investment and its service providers, including Goldman Sachs and its affiliates. Similarly, interests in an Alternative Investment are highly illiquid and generally are not transferable without the consent of the sponsor, and applicable securities and tax laws will limit transfers.  

Alternative Investments such as private equity funds are subject to less regulation than other types of pooled investment vehicles such as mutual funds, may make speculative investments, may be illiquid and can involve a significant use of leverage, making them substantially riskier than the other investments. An Alternative Investment Fund may incur high fees and expenses which would offset trading profits. Alternative Investment Funds are not required to provide periodic pricing or valuation information to investors. The Manager of an Alternative Investment Fund has total investment discretion over the investments of the Fund and the use of a single advisor applying generally similar trading programs could mean a lack of diversification, and consequentially, higher risk. Investors may have limited rights with respect to their investments, including limited voting rights and participation in the management of the Fund. 

Alternative Investments by their nature, involve a substantial degree of risk, including the risk of total loss of an investor’s capital. Fund performance can be volatile. There may be conflicts of interest between the Alternative Investment Fund and other service providers, including the investment manager and sponsor of the Alternative Investment. Similarly, interests in an Alternative Investment are highly illiquid and generally are not transferable without the consent of the sponsor, and applicable securities and tax laws will limit transfers. Private Equity investments are speculative, involve a high degree of risk and have high fees and expenses that could reduce returns; they are, therefore, intended for long-term investors who can accept such risks. The ability of the underlying fund to achieve its targets depends upon a variety of factors, not the least of which are political, public market and economic conditions. 

Alternative Investments are offered in reliance upon an exemption from registration under the Securities Act of 1933, as amended, for offers and sales of securities that do not involve a public offering. No public or other market is available or will develop. Similarly, interests in an Alternative Investment are highly illiquid and generally are not transferable without the consent of the sponsor, and applicable securities and tax laws will limit transfers. 

Alternative Investments may involve complex tax and legal structures and accordingly are only suitable for sophisticated investors. You are urged to consult with your own tax, accounting and legal advisers regarding any investment in any Alternative Investment. 

Conflicts of Interest - There may be conflicts of interest relating to the Alternative Investment and its service providers, including Goldman Sachs and its affiliates. These activities and interests include potential multiple advisory, transactional and other interests in securities and instruments that may be purchased or sold by the Alternative Investment. These are considerations of which investors should be aware and additional information relating to these conflicts is set forth in the offering materials for the Alternative Investment. 

Environmental, Social and Governance (“ESG”) strategies may take risks or eliminate exposures found in other strategies or broad market benchmarks that may cause performance to diverge from the performance of these other strategies or market benchmarks. ESG strategies will be subject to the risks associated with their underlying investments’ asset classes. Further, the demand within certain markets or sectors that an ESG strategy targets may not develop as forecasted or may develop more slowly than anticipated. 

The above are not an exhaustive list of potential risks. There may be additional risks that should be considered before any investment decision. 

 

General Disclosures 

Views and opinions expressed are for informational purposes only and do not constitute a recommendation by Goldman Sachs Asset Management to buy, sell, or hold any security. Views and opinions are current as of the date of this publication and may be subject to change, they should not be construed as investment advice. Individual portfolio management teams for Goldman Sachs Asset Management may have views and opinions and/or make investment decisions that, in certain instances, may not always be consistent with the views and opinions expressed herein. 

The views and opinions expressed are as of September 21, 2022 and for informational purposes only and do not constitute any investment advice or recommendation by Goldman Sachs Asset Management, and may be subject to change.  We have relied upon and assumed (without independent verification) the accuracy and completeness of such information and neither agree nor disagree with the content herein. 

THIS MATERIAL DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY JURISDICTION WHERE OR TO ANY PERSON TO WHOM IT WOULD BE UNAUTHORIZED OR UNLAWFUL TO DO SO. 

This material is provided for informational purposes only and should not be construed as investment advice or an offer or solicitation to buy or sell securities. This material is not intended to be used as a general guide to investing, or as a source of any specific investment recommendations, and makes no implied or express recommendations concerning the manner in which any client’s account should or would be handled, as appropriate investment strategies depend upon the client’s investment objectives. 

Prospective investors should inform themselves as to any applicable legal requirements and taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant. 

This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by Goldman Sachs Asset Management and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and Goldman Sachs Asset Management has no obligation to provide any updates or changes. 

Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources. 

Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or its securities. It should not be assumed that investment decisions made in the future will be profitable or will equal the performance of the securities discussed in this document. 

Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only. 

Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. 

Please note that this material may include certain information on Goldman Sachs AM Alternatives sustainability practices and track record, at an organizational and investment team level, which may not necessarily be reflected in the portfolio of any fund(s) or related investment vehicle(s) you invest in. Please refer to the offering documents of any fund(s) prior to investment, for details on how and the extent to which the fund(s) takes ESG considerations into account on a binding or non-binding basis. 

References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed.  While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark. 

Index Benchmarks Indices are unmanaged. The figures for the index reflect the reinvestment of all income or dividends, as applicable, but do not reflect the deduction of any fees or expenses which would reduce returns. Investors cannot invest directly in indices. 

The indices referenced herein have been selected because they are well known, easily recognized by investors, and reflect those indices that the Investment Manager believes, in part based on industry practice, provide a suitable benchmark against which to evaluate the investment or broader market described herein.  The exclusion of “failed” or closed hedge funds may mean that each index overstates the performance of hedge funds generally.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and S&P Global Market Intelligence (“S&P”) and is licensed for use by Goldman Sachs. Neither MSCI, S&P, nor any other party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. 

United Kingdom: In the United Kingdom, this material is a financial promotion and has been approved by Goldman Sachs Asset Management International, which is authorized and regulated in the United Kingdom by the Financial Conduct Authority. 

European Economic Area (EEA): This financial promotion is provided by Goldman Sachs Bank Europe SE. This material is a financial promotion disseminated by Goldman Sachs Bank Europe SE, including through its authorised branches ("GSBE"). GSBE is a credit institution incorporated in Germany and, within the Single Supervisory Mechanism established between those Member States of the European Union whose official currency is the Euro, subject to direct prudential supervision by the European Central Bank and in other respects supervised by German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufischt, BaFin) and Deutsche Bundesbank. 

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Canada: This presentation has been communicated in Canada by GSAM LP, which is registered as a portfolio manager under securities legislation in all provinces of Canada and as a commodity trading manager under the commodity futures legislation of Ontario and as a derivatives adviser under the derivatives legislation of Quebec. GSAM LP is not registered to provide investment advisory or portfolio management services in respect of exchange-traded futures or options contracts in Manitoba and is not offering to provide such investment advisory or portfolio management services in Manitoba by delivery of this material. 

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United Arab Emirates: This document has not been approved by, or filed with the Central Bank of the United Arab Emirates or the Securities and Commodities Authority. If you do not understand the contents of this document, you should consult with a financial advisor. 

Israel: This document has not been, and will not be, registered with or reviewed or approved by the Israel Securities Authority (ISA”). It is not for general circulation in Israel and may not be reproduced or used for any other purpose. Goldman Sachs Asset Management International is not licensed to provide investment advisory or management services in Israel. 

Jordan: The document has not been presented to, or approved by, the Jordanian Securities Commission or the Board for Regulating Transactions in Foreign Exchanges. 

Colombia: Esta presentación no tiene el propósito o el efecto de iniciar, directa o indirectamente, la adquisición de un producto a prestación de un servicio por parte de Goldman Sachs Asset Management a residentes colombianos. Los productos y/o servicios de Goldman Sachs Asset Management no podrán ser ofrecidos ni promocionados en Colombia o a residentes Colombianos a menos que dicha oferta y promoción se lleve a cabo en cumplimiento del Decreto 2555 de 2010 y las otras reglas y regulaciones aplicables en materia de promoción de productos y/o servicios financieros y /o del mercado de valores en Colombia o a residentes colombianos.  Al recibir esta presentación, y en caso que se decida contactar a Goldman Sachs Asset Management, cada destinatario residente en Colombia reconoce y acepta que ha contactado a Goldman Sachs Asset Management por su propia iniciativa y no como resultado de cualquier promoción o publicidad por parte de Goldman Sachs Asset Management o cualquiera de sus agentes o representantes. Los residentes colombianos reconocen que (1) la recepción de esta presentación no constituye una solicitud de los productos y/o servicios de Goldman Sachs Asset Management, y (2) que no están recibiendo ninguna oferta o promoción directa o indirecta de productos y/o servicios financieros y/o del mercado de valores por parte de Goldman Sachs Asset Management.  

Esta presentación es estrictamente privada y confidencial, y no podrá ser reproducida o utilizada para cualquier propósito diferente a la evaluación de una inversión potencial en los productos de Goldman Sachs Asset Management o la contratación de sus servicios por parte del destinatario de esta presentación, no podrá ser proporcionada a una persona diferente del destinatario de esta presentación.   

 

Date of First Use: September 28, 2022.  291386-OTU-1672976

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