- We believe equity markets should outperform bonds in the next 12 months. While we expect volatility to remain high in the short term, we forecast global equities to return around 20% and global bonds to return 6% in 2009.
- Given the relatively high level of volatility in inflation expectations, we view inflation as an important source of risk to our bond forecasts.
- Real GDP should contract for the full year of 2009 in the US, Europe and Japan. The effects of the particularly strong monetary and fiscal stimuli should progressively strengthen the G7 economies.
- Given the magnitude of the decline in commodity prices in 2008, it is possible that the annual rate of headline inflation in the US and Europe will turn negative sometime this year. We do not expect core inflation, which excludes food and energy prices, to turn negative in 2009.
Goldman Sachs Asset Management