Goldman Sachs asset managers see US economy, stocks slowing

By Suzanne McGee

(Reuters) -Goldman Sachs Asset Management (GSAM) 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.

That makes the investment landscape more complex, but one that still presents opportunities, including a broader array of AI stocks, GSAM said in its mid-year outlook.

"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."

The BlackRock Investment Institute (BII), an arm of BlackRock, also released its mid-year outlook 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.

By far the biggest trend in the U.S. stock market this year has been the dominance of a small handful of companies linked to the artificial intelligence (AI) theme, notably semiconductor giant Nvidia. Only five stocks and that single trend generated half of all stock market returns in the first six months of 2024, 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.

"We are seeing decelerating earnings growth" and the potential for domestic and global political events to unsettle U.S. stocks, said Deladerriere.

"Uncertain is just kind of the status quo right now," said Rosner.

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. He also noted the appeal of Japanese reforms to corporate governance.

(Reporting by Suzanne McGee; Editing by Emelia Sithole-Matarise and Nick Zieminski)

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