With 2018 winding down, investors are starting to shift their attention to what 2019 holds for the economy and market. According to Goldman Sachs, the economic outlook for 2019 doesn’t appear to be as friendly as it was this year and could be challenging for U.S. investors.

Nevertheless, while Goldman recommends that investors remain cautious, it isn’t quite sounding the alarm yet. “Despite the uncertainties, we think it is too soon to head for the risk bunker. While some incremental caution is likely warranted in 2019, our view is that portfolios should maintain a modestly pro-risk tilt,” the Charlie Himmelberg, chief markets economist and head of global markets research at Goldman, said in a note to clients on Thursday.

Heading into the new year, Goldman recommended paying attention to some key market topics that could play important roles in 2019.

For starters, the benefits of the tax cuts that went into effect in 2017 are likely to slow down dramatically next year, thus the firm stated that investors should remain smart about riskier assets. “Investors [should] focus on stocks with stable, secular growth that should be insulated from a decelerating economy as well as defensive, higher ‘quality’ attributes, such as strong balance sheets and higher pricing power,” Himmelberg said.

The Fed and interest rates are other important topics to keep an eye on. Even though the Fed has been steadily increasing rates and appears to be on track to continue on that path, the market may have already priced in the majority of those rate hikes, according to Himmelberg. “We do not think additional Fed tightening presents insurmountable risks to markets. For instance, while we expect two more rate increases in 2019 than currently discounted by markets, 11 of the 13 hikes we expect from the Fed this cycle have already occurred or are priced in. Therefore, financial markets have arguably ‘paid the price’ of Fed hiking to a significant degree.”

Trade war and international issues

Additionally, the current state of affairs in China, Italy and emerging markets should also be on investors’ radars, Himmelberg said.

The trade war between the U.S. and China and the potential for further tension may continue to play a part in hindering growth momentum. “Activity in China is likely approaching levels that are intolerably low for the government, and there is a good chance that growth momentum may bottom over the next few months on the back of more determined policy support,” Himmelberg explained.

Furthermore, budget issues in Italy, as well as weakening emerging markets, could also be headwinds in 2019. “We expect risk appetite to remain constrained until the Italian budget crisis is resolved, which may be deep into next year,” according to Himmelberg. And while it has been a rocky six months for emerging markets due to trade tensions and rising interest rates, Goldman explained that in their view, a lot of those worries may have already been priced into the market.

Finally, Goldman thinks that the recent steep sell-off in crude oil should not be too worrisome to investors. A late-stage rally and outperformance is still in the cards. “Our commodity strategists expect commodity prices to rally off this trough and forecast … high single digit returns over the next twelve months.”

“[These are the] top macro and market themes that we expect to dominate the investment landscape in 2019. Our modestly constructive though incrementally cautious, macro view argues for remaining invested in risky assets, but moving up in quality and looking for portfolio hedges where appropriate,” the firm stated.

Heidi Chung is a reporter for Yahoo Finance. Follow her on Twitter: @heidi_chung.

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