A senior executive at Goldman Sachs says markets remain resilient despite heightened volatility and geopolitical uncertainty.
In Goldman Sachs’ ‘The Markets’ podcast, John Storey, co-head of equity distribution, says: describes the current environment is ‘fragile’, with investors heavily hedged and volatility almost extremely high.
Despite this, Storey is surprised at how well the shares have held up and remains bullish on a number of sectors.
“When I was here last June, I highlighted the issue of the European financial sector. It has been incredibly resilient over this period. It’s still high single-digit price-to-earnings numbers. It’s double-digit earnings growth. Double-digit shareholder returns. And earnings improvements are still being made.”
So I really like that theme. And then I think the second theme that we just talked about is the shift from asset-light to asset-heavy in the sectors that we talked about. So data centers, defense, mining, materials, you know, all the equipment spend is just a great place to be.
Storey highlights the continued rotation from asset-light to asset-rich sectors, especially those related to infrastructure and physical capital, as investors reassess the long-term impact of artificial intelligence on business models.
He also reiterates his confidence in the ‘picks and shovels’ approach to (AI) investments.
“I think the picks and shovels business around AI has worked incredibly well. The capex, as we continue to revise our numbers, or companies continue to revise their capex spend numbers, is playing out in the markets. So how can you not hold it for a long time, like with picks and shovels, semiconductors, and so on.”
Storey adds that while it is widely expected that there will be AI-driven productivity gains, the impact on profits remains less clear, reinforcing the appeal of companies that provide the infrastructure behind the technology rather than its end applications.
Looking ahead, he said investors should closely monitor developments in geopolitical conflicts, particularly in the Middle East, as well as U.S. labor market data, both of which could influence growth expectations and the direction of the market.
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