Goldman Sachs Asset Management said it would siphon some of the profits from high-flying tech stocks and invest the money instead in undervalued companies. Alexandra Wilson Elizondo, co-chief investment officer of multi-asset solutions, said the global investment bank believes tech stocks will be under pressure and favors sectors such as energy and Japanese stocks. He said he is doing so.
According to a recent Bloomberg report, the U.S. economy is on a soft landing trajectory, but there are a number of risks that could change its trajectory. “We prefer to profit from technology and move on to other areas,” the official said in an interview with Bloomberg.
In the tech industry, “the risk-reward profile is skewed downwards,” he added. “While we still believe in being long on stocks and putting them in your portfolio, we believe there are more attractive opportunities to access.”
Also read: Now, Goldman Sachs also sees the Indian economy growing faster.
The returns among the seven Magnificent stocks are already starting to diverge. While Nvidia has soared 72% this year, other companies haven't fared as well. Apple's stock price has been struggling due to weak demand for iPhones in China, while Tesla's stock price has fallen 30% year-to-date due to concerns about demand for electric vehicles (EVs).
Goldman Sachs Asset Management has an overweight position in energy stocks as a hedge against inflation and geopolitical risks, says Wilson Elizondo. Bloomberg reports that trading has been strong so far this year. Tech stocks are up 11%, while S&P 500 oil and gas companies are up 16%.
The official said Goldman remains wary of small-cap stocks as well as utilities and REITs because it is sensitive to high interest rates. Still, some small-cap stocks are attractive because of their cheap valuations and could be acquisition targets for fast-growing artificial intelligence (AI) companies.
Japan is also an area where Goldman is overweight due to corporate reforms, improved business confidence, and relatively low valuations. “Japan offers great opportunities for both cyclical and structural stories,” said Wilson Elizondo.
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