Goldman Sachs’ senior executive says that markets are resilient, despite increased volatility and geopolitical uncertainties.
John Storey describes the current market environment on Goldman Sachs “The Markets”, podcast as “fragile,” because investors are heavily hedged, and volatility is at extreme levels.
Storey remains optimistic about a variety of sectors despite the fact that equities are performing well.
When I visited here in June last year, I focused on the European Financials. It has been extremely resilient in this time period. The PEs are still in the high single digits. Double-digit growth in earnings. Double-digit shareholder returns. Earnings upgrades are still ongoing.
This is a theme I really like. The second thing that I would like to mention is the shift in asset weight from the asset light sectors. Data center, defence, mining, and materials are all great places to spend money on equipment.
Storey highlights that investors are reassessing the impact artificial intelligence will have on their business models. This is especially true for sectors tied to physical assets and infrastructure.
He reiterated his confidence in “picks-and-shovels” (AI) investment.
I think that the trade in picks and shovels around AI worked extremely well. As we revise up our numbers, or as corporations revise up theirs, the capex spending is playing out in the market. How can you be short picks and spades, semiconductors et al .”?
Storey says that although AI is expected to drive productivity increases, its earnings impact has not been fully determined. This makes it more appealing for companies who provide the infrastructure and end-applications of the technology.
Investors should be watching closely the developments of geopolitical conflict, especially in the Middle East. They also need to monitor U.S. Labor Market data. Both could have an impact on growth expectations.
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Sources of Images include Pixabay Creative Commons & Midjourney
Goldman Sachs Exec Stays Bullish On Two Trades Amid Geopolitical Turbulence can be updated as new information becomes available.
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