Building Confidence
Confidence in the macroeconomic outlook continues to edge up as we move further into 2024. Growth remains resilient, inflation has fallen globally, and financial conditions are loosening. Signals suggest corporate sentiment is improving too. M&A activity has recovered from rock bottom levels with management teams appearing more comfortable making deals. Still, this is no time for complacency.
It is hard to have absolute confidence that the inflation fight has been won. Recent inflation reports have tempered expectations of interest rate cuts in the US and indicate that the “last mile” of inflation persistence remains ahead of us. A reacceleration in growth and renewed price pressures cannot be ruled out. At the same time, the risk of recession has not completely disappeared. Unresolved conflicts, geopolitical competition between nations, and upcoming political elections globally, continue to present uncertainties.
In an environment offering reasons for caution, but also some optimism, we believe balanced and diversified portfolios can combine resilience with opportunities to generate returns. In the equity market, an active approach may help investors navigate concentration risk and uncover more reasonably priced pockets of the market. Attractive yields may still be found in core fixed income given where interest rates stand today. Alternatives, including private equity, private credit, and hedge funds, also present opportunities, though we expect manager selection and company fundamentals to become increasingly important.
We continue to look toward long-term future growth opportunities. At a country level, India stands out as a stronger-for-longer economic growth story, backed by reforms efforts, favorable demographics, and supply chain shifts. Megatrends that transcend borders are also reshaping economies and capital markets. For instance, we see an expanding set of opportunities to invest in and with artificial intelligence (AI). Investors also have more levers at their disposal to advance financial inclusion and sustainability goals without sacrificing returns.
Changing economic conditions, uncertain geopolitics and accelerating secular shifts mean tomorrow is likely to be more complex than today. We hope this edition helps you build confidence to seek out investment opportunities and navigate challenges ahead.
Risk Disclosures
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.
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.
Equity investments are subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular sectors and/or general economic conditions. Different investment styles (e.g., “growth” and “value”) tend to shift in and out of favor, and, at times, the strategy may underperform other strategies that invest in similar asset classes. The market capitalization of a company may also involve greater risks (e.g. "small" or "mid" cap companies) than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements, in addition to lower liquidity.
Investments in fixed income securities are subject to the risks associated with debt securities generally, including credit, liquidity, interest rate, prepayment and extension risk. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in the bond’s price. The value of securities with variable and floating interest rates are generally less sensitive to interest rate changes than securities with fixed interest rates. Variable and floating rate securities may decline in value if interest rates do not move as expected. Conversely, variable and floating rate securities will not generally rise in value if market interest rates decline. Credit risk is the risk that an issuer will default on payments of interest and principal. Credit risk is higher when investing in high yield bonds, also known as junk bonds. Prepayment risk is the risk that the issuer of a security may pay off principal more quickly than originally anticipated. Extension risk is the risk that the issuer of a security may pay off principal more slowly than originally anticipated. All fixed income investments may be worth less than their original cost upon redemption or maturity.
General Disclosures
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.
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