As AI stocks correct, Goldman Sachs sees opportunity in healthcare & non-AI equities
US midterm elections could shift market dynamics, prompting investors to adopt more defensive positions in their portfolios. Healthcare is anticipated to benefit from advancements in AI as it sees potential growth. Many traditional defensive sectors, however, appear less attractive due to elevated valuations. Goldman Sachs emphasizes the importance of focusing on companies with strong…
The upcoming US midterms could hasten stock market reallocation, with Goldman Sachs' Lou Miller suggesting the healthcare sector as a potential defensive investment. Miller explained that investors have already started shifting towards defensive positions before the election, amid a challenging environment for active investors. Data center stocks have declined 36%, memory stocks 42%, optical networking stocks 46% and NeoCloud stocks 57% following sharp corrections in AI-related investments.
Miller predicts a lower bar for surprises and positive catalysts ahead for these sectors. Healthcare is identified as a potential beneficiary of the next AI trade, with the sector expected to witness accelerating earnings growth next year, driven by increased AI adoption in medical tools and diagnostics. Miller advised against expensive defensive stocks, such as consumer staples, which have become unattractive due to elevated valuations.
He suggested focusing on companies with strong balance sheets, quality earnings, and healthy free cash flows. Miller's preferred trade is the S&P 500 excluding AI, citing attractive valuations and earnings growth prospects. Key market drivers he identified include employment, inflation, corporate earnings, and the Federal Reserve's December 9 policy decision.
Looking ahead to year-end, Miller expressed cautious optimism, anticipating a modest rally, described as a "relaxed Santa Rally."
Written by urgent.news from Hindu BusinessLine's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
This story
This is one outlet's version. Read the fullest account.
