Goldman Sachs' top trade recommendations for 2017

Goldman Sachs CEO Lloyd Blankfein. Photo: Mark Wilson / Getty Images.

Investors in Australia and around the world will be mulling fresh trade ideas for the year ahead.

Any views, particularly from prominent investment banks, will no doubt garner plenty of interest, particularly at a time of heightened uncertainty about the prospects for the global economy under a Donald Trump presidency in the United States.

Enter Goldman Sachs with its latest batch of top trade recommendations for the year ahead, encompassing everything from currency to emerging market trades, commodities to interest rates, to whet the appetite of investors.

Here’s the bank’s top seven open trade recommendations for 2017.

1. Stay long US$ equally weighted against EUR and GBP, on November 17, 2016, with a basket indexed to 100, a target of 110 and a stop at 95, currently trading at 101.87.

2. Stay long $/CNY via the 12-month NDF, opened on November 17, 2016 with an entry level of 7.07, for an initial target of 7.30 with a stop at 6.75, currently trading at 7.24.

3. Stay long an equally-weighted basket of BRL, RUB, INR, ZAR versus short an equally-weighted basket of KRW and SGD, opened on November 17, 2016 with an entry level of 100, total return target of 114 and stops at 93, currently trading at 107.53.

4. Stay long Brazil, India and Poland equities (BOVESPA, NIFTY, WIG) FX-unhedged, opened on November 17, 2016, with an entry level of 100, for a target return of 120 and a stop of 90, currently trading at 107.58.

5. Stay long US 10-year US TIPS ‘break-even’ inflation at an entry level of 1.90%, opened on November 17, 2016, with an initial target of 2.30% and stop at 1.60%, currently trading at 2.00%, and long Euro 10-year inflation via swaps at an entry level of 1.25%, with a target of 1.60% and a stop at 1.00%, currently trading at 1.50%.

6. Long EURO STOXX 50 2018 dividends (BBG: DEDZ8 Index) for equity-like ‘carry’ with little duration risk; target 125, now at 117.3, entry on November 17 at 111.9, stop at 105.

7. Stay long enhanced S&P GSCI commodity index (number 139) indexed to 100, opened on November 21, 2016, with a target of 112 and a stop of 94, currently trading at 107.61.

Goldman says that these are longer-term structural views which are typically managed with a wide stop, and assessed on the basis of whether the fundamentals continue to support the medium-term investment theme.

At present, all trades remain open, meaning that they have neither achieved Goldman’s price target or been stopped out due to the trade moving against expectation.

By early February last year, Goldman had abandoned five of its six top trade recommendations for 2016, largely as a result of severe volatility across financial markets due to concerns over the Chinese economy that were present at the time.

Given that outcome, it’s likely that both trend and contrarian investors will be interested in Goldman’s recommendations for the year ahead.

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