China and Europe pose the biggest risks.

The US "remains the strongest anchor of the global recovery" predict the Wall Street institution's economists, led by Dominic Wilson, in their report detailing the year ahead. Developed markets will improve slightly because of the benefits of cheaper oil, looser credit and accommodative financial conditions, the report says.

Goldman is more bullish than consensus on growth next year. "We also have more confidence in our view that the US expansion has several years to run and in the resilience of the US economy to weak overseas demand."

It admits that even more controversial is its borderline optimistic take on Europe – that growth could improve by a little – and "while we also think there is a real downside risk scenario in the euro area, we are not convinced that the market is adequately reflecting the prospect of improved US growth over the next few months".

US rate rise tipped in September

Divergence will be evident again. Goldman has the Federal Reserve raising interest rates in September next year and the European Central Bank and Bank of Japan undertaking stimulus measures.

Soft growth and low inflation outside the US will keep US yields low, precluding a sharp rise in Treasuries as interest rates in the US creep higher. However, Goldman thinks the pace of interest rate rises will be faster and steeper than the market expects and rates are "neutral" when they get to 4 per cent. They are now at the zero bound.

A "new oil order" has arrived, which will benefit consumers, but hurt producers. So oil importers will experience a positive impact on growth.

The oil price will only serve to entrench the weak inflation nearly all economies are battling and "there is a meaningful risk that a more acute deflationary mindset takes hold instead".

Worsening low inflation in Europe could be enough to prompt the ECB to action with a bond-buying program that is more aggressive than markets expect.

Bullish on US$

Goldman remains a bull on the US dollar, which it says should appreciate against a basket of group of 10 currencies. If anything, the market is underestimating the force of this "multi-year" US dollar recovery, the bank says.

"Relative to a long historical perspective, the US dollar strength so far looks modest. Nor does the US dollar look strong on that basis relative to much of the G10."

Comparing asset classes, Goldman finds equities more attractive than bonds and favours emerging markets' stocks over developed markets' stocks, in spite of the increased risk.

A$ at 82 US cents

Its Australian dollar forecast for the end of next year is US82¢. US Treasuries will reach a 3 per cent yield by then and German Bunds 1.25 per cent, it says.

"The commodity currencies – Australian dollar, New Zealand dollar and Canadian dollar – will continue to face depreciation pressures from an ongoing decline in their terms of trade, reflecting recent commodity price falls," Goldies says.

"In addition, while none of these central banks are talking as if they are close to easing policy, they are likely to lag the Fed in eventual tightening, which should prevent undue currency strength."