By Suzanne McGee
(Reuters) – Goldman Sachs Asset Management executives expect the U.S. economy to grow at a slower clip of about 2% in the second half of 2024, they said on Tuesday, with equity indexes seen largely flat due to declining earnings growth and political anxieties.
“It’s absolutely a soft landing,” said Lindsay Rosner, head of multi-sector investing at the asset management arm of Goldman Sachs. “As the data comes through, that’s what we’re seeing.”
Rosner and other GSAM executives discussed their outlook in an online media gathering on Tuesday morning.
“There is a real probability” that investors will see interest rate cuts in the United States in the second half of 2024, Rosner added. She does not expect the Federal Reserve to begin cutting until September, but added that rate cuts could continue at a pace of 25 basis points per quarter.
As interest rates fall, Rosner said she expected the fixed income market to benefit. She said she saw particularly interesting opportunities in the high yield bond market and in structured credit.
For equity investors, the biggest characteristic of the U.S. market has been that only five stocks and a single trend – AI – have generated half of all stock market returns, said Alexis Deladerriere, global equity portfolio manager and head of developed markets at GSAM.
“We think you need to move away from the early winners” in AI and diversify exposure to this trend, he said.
As earnings growth decelerates overall and political anxieties mount both domestically and globally, Deladerriere said he anticipates U.S. stocks will remain largely flat in the second half of the year but that a broader array of companies will outperform, including small caps.
Deladerriere added GSAM views Indian and Japanese equities as particularly attractive at this point, as plays on trends ranging from AI to addressing climate change.
(Reporting by Suzanne McGee; Editing by Emelia Sithole-Matarise)
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