‘Regime Change’ Will Complicate Investing, says Goldman Expert

A GSAM co-chief investment officer says the world economic order is shifting as nations reverse decades of unfettered free trade.

Nimble is the name of the game for money managers amid hastening geopolitical changes and pandemic recovery, a Goldman Sachs expert advised.

“We expect the Fed to get (U.S.) inflation under control. Still, it’s a worldwide economy,” said Maria Vassalou, co-chief investment officer of multi-asset solutions for Goldman Sachs Asset Management (GSAM). She spoke at the firm’s recent webinar, “Navigating the Financial Vortex.”

The world economic order is shifting as nations reverse decades of unfettered free trade and move supply chains closer to consumers, she said. Markets are segmenting more quickly, and economies are trying to build resilience to consequences of climate change.

“That will create some opportunities, but may actually close out some others,” she said.

Technology stocks, for one, have taken a big hit and may not soon resume the level of opportunities investors enjoyed in the past decade.

“We are unlikely to go back to globalization,” Vassalou said. “We are seeing a lot of challenges with the war in Ukraine and the situation in China. Generally, what we’re seeing means that we are in a regime change going forward that will complicate investi­ng, and we’ll have to tackle more uncertainty.”

Inflation is likely to stay elevated more than Americans grew accustomed to in the past decade or so, she said.

“I think we are in for significant change in how we manage assets,” Vassalou said.

“We need to be much nimbler in investing, much more dynamic. That’s where the importance of the financial planner comes in. Planning for retirement requires a constant rethinking of the investment allocations to adapt to the changing economic conditions, but also to the changing life events,” Vassalou said.

In general, Vassalou said, financial advisors now should invest conservatively with wider diversity in different investment classes to help navigate the changing inflation that eats into clients’ saving and spending power.

Vassalou said inflation shows signs that it has peaked for the U.S. It is slowly coming down, while wages are still gaining. But inflation is “in the core now,” throughout the spectrum of goods and services. As “a global phenomenon,” it will put pressure on the U.S. economy for some time, because markets are global, she said.

Because inflation reduces buying power, clients should try to save more — as much as they can in all asset classes, she said.

Linda Hildebrand is a longtime newspaper editor and consumer-action reporter.

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