Goldman Econ Reveals Top Charts Of 2017: It’s All About Goldilocks

Look, here’s the thing: Goldman wanted to drive home the “Goldilocks” narrative one more damn time before Christmas, ok?

As reminder, “Goldilocks” is the foundation upon which Wall Street’s constructive 2018 outlooks are built. There are only a few ways you can justify being constructive on anything in an environment where stocks, bonds, and credit are all simultaneously expensive. And if you don’t want to be the guy/gal who explicitly advocated investing based on the greater fool theory or some derivation thereof, well then you pretty much have to fall back on “Goldilocks.”

The Goldilocks narrative is simple: a synchronous upturn in global growth coupled with still-subdued DM inflation gives everyone an excuse to simultaneously claim that the recovery is in something that approximates full swing and that despite the improving economic backdrop, central banks will point to lackluster inflation as an excuse to remain gradualistic in their approach to normalization.

This environment is conducive to low vol. regimes and it’s supportive for bonds, credit, and equities, as low inflation provides a bid for bonds and the hunt for yield created by the persistence of accommodative policy buoys credit and ultimately, riskier assets as investors are forced out the risk curve.

Ok, so that better persist, because if it doesn’t, the rationale for owning a market that’s stretched to historical extremes is going to disappear.

Anyway, Goldman’s economics team is out with their “top charts of 2017” and virtually all of them serve to underscore the Goldilocks meme.

Acceleration of global growth…