Goldman Sachs Asset Management: Suggests moderately overweighting US stocks, bullish on technology, energy, and industrial stocks
Goldman Sachs Asset Management recommends a moderate overweight position in US stocks, bullish on technology, energy, and industrial stocks. The global growth environment is favorable, inflation is slowing, and global central banks are cutting interest rates one after another, with a positive view on risk assets. Although the current P/E ratio of US stocks is relatively high, it is not unreasonable compared to the long-term average. Goldman Sachs Asset Management recommends cyclical stocks, preferring energy and industrial stocks. They are optimistic about technology stocks and believe in the positive outlook for artificial intelligence. Valuations of stocks outside the US are relatively discounted compared to US stocks, with a "overweight" view on Japanese stocks. It is expected that US economic growth will slow down, and the trend of inflation will continue
According to the financial news app Smart Finance, Neill Nuttall, Co-Chief Investment Officer of Multi-Asset Solutions at Goldman Sachs Asset Management, stated that despite geopolitical risks, the global growth environment is favorable, inflation is slowing down, and global central banks are cutting interest rates one after another. He holds a positive view on risk assets and recommends a "moderate overweight" position in US stocks. He is optimistic about technology, energy, and industrial stocks, but holds a cautious view on defensive stocks, utilities, and essential consumer goods.
With US stocks hitting new highs this year, Neill Nuttall believes that the 12-month forward price-to-earnings ratio of the S&P 500 is 22 times, higher than the historical average. However, the forward price-to-earnings ratio of the seven giants in the US stock market is 32 times, indicating that other components of the index are trading at around 16 to 17 times, close to the long-term average. In the current context, being in line with the long-term average is not unreasonable.
He recommends cyclical stocks, favors energy stocks, and believes that energy stocks are attractive at the current stage. As for industrial stocks, they may benefit from the US "Infrastructure Investment and Jobs Act" fiscal stimulus and infrastructure developments around chips.
Considering the promising outlook for artificial intelligence (AI), he does not recommend "underweighting" technology stocks. The impact of AI is still in its early stages, and the beneficiaries of AI are bound to be data, including data collection and utilization. There may also be other potential beneficiaries yet to be discovered. With the development of AI, high-end chips are facing challenges due to energy shortages, and winners will change over time.
Furthermore, Neill Nuttall believes that stocks outside the US are relatively discounted compared to US stocks. For example, the forecast price-to-earnings ratio of UK stocks is 11 to 12 times, and the discount of European stocks relative to US stocks has reached a record high.
Neill Nuttall holds a "overweight" view on Japanese stocks. He explains that 43% of the profits of Japanese companies come from overseas, so when converted to yen, it is positive. In fact, the impact on returns is limited, but the benefits of a weak yen are being offset by domestic challenges caused by imported inflation. However, 42% of Japanese stocks are cyclical stocks, so they can benefit from the global interest rate cut cycle.
He points out that the US economic growth has been above trend but is slowing down. He believes that after inflation rises in the first quarter due to seasonal and special factors, the tightening trend will continue, creating an environment for rate cuts. Goldman Sachs expects the Fed to cut interest rates in line with the market, with expectations of two to three rate cuts by January next year, making fixed income assets somewhat attractive.