Goldman Sachs Asset Management has said it will skim off some of its profits from high-flying technology shares and instead put that money into cheaper companies. The global investment bank believes tech shares will come under pressure and prefers areas like energy and Japanese shares, said Alexandra Wilson-Elizondo, co-chief investment officer of multi-asset solutions.
According to a recent Bloomberg report, the US economy is on track for a soft landing, but there are plenty of risks that could change the trajectory. “We like taking profits on technology and moving toward other sectors,” the official told Bloomberg in an interview.
In the tech industry, “the risk-reward profile is skewed to the downside,” she added. “While we still believe in being long equities and having them in the portfolio, we think that there are some more attractive opportunities to access.”
Also Read: Now Goldman Sachs too sees India’s economy growing at a faster clip
Returns among the Magnificent 7 stocks have already started to diverge. While Nvidia Corp. has soared 72 per cent this year, others have not fared as well. Apple Inc. shares have struggled due to weak demand for iPhones in China, and Tesla Inc. is down 30 per cent year-to-date (YTD) dragged by concerns over electric vehicle (EV) demand.
Goldman Sachs Asset Management is holding an overweight position on energy shares as a hedge against inflation and geopolitical risks, said Wilson-Elizondo. So far this year, it’s been a good trade, according to the Bloomberg report. S&P 500 oil and gas companies are up 16 per cent, compared with an 11 per cent gain for tech shares.
The top official said that Goldman is still cautious on utilities and REITs, as well as small-caps because of their sensitivity to high-interest rates. Even so, some small-caps are attractive because of their cheap valuations and a few may be takeover targets for fast-growing artificial intelligence (AI) companies.
Japan is another area that Goldman is overweight due to corporate reforms, improving business sentiment and relatively low valuations. “Japan offers a nice opportunity to both a cyclical and structural story,” said Wilson-Elizondo.
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Published: 10 Apr 2024, 09:10 PM IST