Will the Fed's interest rate cut signal be sounded? Goldman Sachs executives strongly recommend small-cap stocks for gold mining
Goldman Sachs recommends investors to pay attention to small-cap stocks, as the market expects the Federal Reserve to cut interest rates. Ashish Shah, Chief Investment Officer of Goldman Sachs Asset Management, pointed out that small companies will be the main beneficiaries of rate cuts, but attention should be paid to loan quality. He recommended the Goldman Sachs Small Cap Core Stock ETF, believing that high-quality small-cap stocks will perform well in the next 6 to 12 months. Shah warned that large-cap stocks may face capital outflows and advised diversifying portfolios. The market expects the Federal Reserve to cut benchmark interest rates, and Shah also mentioned the uncertainty of the November U.S. election
According to the financial news app Zhitong Finance, Ashish Shah, Chief Investment Officer of Public Investments at Goldman Sachs Asset Management, suggested in an interview that investors should pay attention to small-cap stocks as the market generally expects the Federal Reserve to begin lowering interest rates next week. Shah pointed out that with the decrease in interest rates, small companies, due to their higher proportion of floating rate loans, will be the main beneficiaries of the rate cut. However, he also reminded investors to pay attention to the quality of loans when considering investments.
Shah is cautious about small-cap stocks in the Russell 2000 Index, as it includes some low-quality meme stocks. He personally prefers the Goldman Sachs Small Cap Core Stock ETF (GSC.US), which is a collection of high-quality companies he is optimistic about, with both growth potential and value. He believes that a high-quality small-cap strategy is expected to perform well in the next 6 to 12 months.
So far this year, the performance of the Goldman Sachs Small Cap Core Stock ETF has outperformed the Russell 2000 Index (up 11.5%) and the S&P 500 Index (up 17%). Shah predicts that with the arrival of January, the best investment period for small-cap stocks will also come.
For large-cap stocks, Shah recommends that investors follow the common practice in the market, which is to diversify their portfolios. He pointed out that in the past month or two, large-cap stocks have experienced significant outflows of funds, possibly because investors have been overly invested in these large-cap stocks. He warned that without timely adjustments, investors may miss opportunities to lock in profits and stock market returns.
As of Thursday evening, the market expects the Federal Open Market Committee (FOMC) to have a more than 60% probability of lowering the benchmark interest rate by 25 basis points from the current range of 5.25% to 5.5%. This prediction has sparked discussions about the possibility of implementing a larger rate cut of 50 basis points.
Shah also mentioned the uncertainty of the November U.S. elections, expressing concern that this may cause investors to hesitate and miss investment opportunities. He advised investors to actively consider small-cap stocks to potentially achieve better returns in the current market environment.
Finally, Shah listed some ETFs that track small-cap stocks, including iShares Russell 2000 Index ETF (IWM.US), S&P SmallCap 600 Index ETF-iShares (IJR.US), Small-Cap ETF-Vanguard (VB.US), and DIMENSIONAL U.S. SMALL CAP ETF (DFAS.US), providing investors with diversified choices