Yes. We expect the global expansion to continue, carrying global equity markets to new highs in 2018.

1. We think the economic and market cycle is well supported and has yet to fully mature.
2. Investors will likely need to navigate more risks, including moderating growth, central bank tightening and geopolitical developments.
3. We believe emerging market (EM) economies will outperform developed economies, supporting EM assets.

Investment Implications
With the global economic expansion likely to continue, we prefer equities over credit and credit over rates. EM, outside of China, is a bright spot and we continue to prefer EM over developed market assets.

We prefer equity over credit, and credit over rates as we think the expansion has yet to fully mature. We prefer EM relative to DM.

Source: GSAM. As of November 2017

No. We see US and other developed market government bonds as the overvalued asset. Outside of bonds, we think valuations are justified by current macro conditions.

1. US equity valuations are elevated relative to history but continue to offer a reasonable risk premium over other assets.
2. We think equity valuations in Europe, Japan and Emerging Markets are attractive relative to the US.
3. Central bank tightening could be a catalyst for broad market volatility. Outside of bonds, we think the main impact will be in currencies though equities could also see a shorter-term drawdown.

Investment Implications
We think global equity returns are likely to be positive in 2018 but much more moderate compared to 2017, with greater risk of meaningful drawdowns. We think this favors a dynamic approach to asset allocation and a preference for European, Japanese and Emerging Market equities.

Kane Brenan on why equities may continue to climb

Probably. While investors may worry about changes to central bank asset purchase programs, we think rate hikes are the more likely source of volatility.

1. We think markets are well prepared for a gradual and well-telegraphed unwinding of central bank balance sheets.
2. Rate hikes are probably the bigger risk as we think market expectations for Federal Reserve rate hikes are unrealistically low.
3. With tight labor markets, central banks are setting a lower bar for rate hikes despite only gradually rising inflation.

Investment Implications
We are bearish on US and other developed market government bonds, and cautious on corporate and mortgage-backed bonds. We believe higher US rates are likely to temporarily favor the US dollar versus other developed currencies.

Mike Swell on navigating fixed income as central banks tighten

Consumer staples look vulnerable to disruption in 2018. Major online retailers are becoming bigger players in staples, pressuring traditional leaders in the sector.

1. The internet has broken down traditional barriers to entry for consumer staples companies.
2. Online retailers are developing their own staple brands and marketing them through voice-activated assistant devices with the advantage of proprietary data.
3. Longer term, we see disruption coming to virtually every business sector we invest in, with autos a prime candidate to follow consumer staples.

Investment Implications
We look to invest in the beneficiaries of disruption and limit our exposure to those that are being disrupted. Within consumer staples, we favor niche brands that are benefitting from lower barriers to entry, and we try to avoid second-tier brands that are vulnerable to the growth of on-line retailer brands.

Katie Koch on equity investing in an age of disruption

Big data can reveal subtle and often unnoticed connections between companies that may impact their performance.

1. The digitalization of entertainment stretches across software companies as well as traditional brick-and-mortar firms.
2. The resurgence of luxury goods and services has cut across economic sectors.
3. More companies are pointing to changes in regulation as a possible business risk.

Investment Implications
Our thinking shouldn’t be constrained by traditional definitions of businesses and sectors. As technological upheaval continues, the importance of thinking broadly about unexpected connections between companies will continue to grow. We believe that investors should think critically about what constitutes a company’s peer group and about market themes and secular changes that may connect otherwise disparate companies.

Nicholas Chan on the market signals hidden in big data

We believe investors should look beyond traditional asset classes and borders.

1. Continued economic expansion favors global and emerging market equities
2. Elevated valuations favor active and alternative approaches to traditional markets
3. Central bank tightening favors diversified sources of yield