Goldman Sachs has just released its top ten market themes for 2013 which represents a broad list of macro themes which GS thinks will dominate markets next year. The following is a brief listing of these 10 themes along with the major factors constituting every theme. We will expand on every theme separately in further publications.

1. Global growth: A ‘hump’ to get over, then a clear road ahead

 Weak growth in early 2013 but a sustained recovery if that period is navigated

 Increased fiscal restraint going into 2013, moderating in 2013H2 and beyond

 Spanish economic and Italian political risks most intense in early 2013

 ‘Room to grow’ globally given output gaps, particularly in advanced economies

 Relaxation of the global energy supply constraint

2. More unconventional easing in the G4

 Ultra-low policy rate environment to continue

 Fed to move towards macro-based criteria; ECB to conduct private asset purchases

 Some chance of a larger shift in BoJ policy, although not our central case

3. Termites eat away at the foundations of the search for yield

 Higher UST yields in 2013 but no big shock disrupting the search for yield

 Towards 2014, a growing risk to bonds from above-trend growth, diminishing QE

 Search for yield to continue to find corporate credit, but risk-reward deteriorating

 Increased risk that easy credit will lead to corporate re-leveraging

4. Housing stabilisation and private-sector healing in the US

 Further modest US home price gains and continued increase in housing activity

 A gradual reduction in the private-sector financial surplus

 Record-low mortgage rates and slow thawing in US lending conditions

5. Euro area a smaller driver of global risk, but still a source of tails

 Weak European growth, and a continued ‘muddle-through’ in central case

 Spanish economic risks intensify in early 2013, mediated by ECB interventions

 Economic pressures ease in Italy, but political uncertainty from general elections

 France fundamentally weak, but easy financial conditions an offset

6. Continued divergence between Euro core and periphery

 Continued divergence in economic outcomes between periphery and core

 More signs of ‘overheating’ in Germany as forecast horizon extends

 Outperformance of peripheral ‘traded’ sectors and core ‘non-traded’ sectors

7. EM growth pick-up revisits capacity constraints

 A pick-up in growth across EM in 2013 but less ‘room to grow’ than in DM

 Limited acceleration in China, followed by stable growth

 Inflation increases tightening risks in places in late 2013 and 2014

8. EM differentiation continues

 Responses to inflationary pressure likely to differ

 Current account imbalances an issue in some economies

 Some idiosyncratic imbalances in EM economies

9. Commodity constraint to loosen medium term

 Cyclically tight markets but structurally more stable

 Despite more stable prices, positive carry likely to persist

 US energy supply story gradually loosens global oil constraint

 Pipeline constraints from mid-west US likely to ease

10. Stable China growth, but not like the old days

 Sequential peaking in China housing cycle puts pressure on iron ore/coal

 Copper supported in the next 6-9 months, and structurally tighter

 Interaction with the peak in the resource investment boom in Australia