(Bloomberg) – Goldman Sachs reinforces the chorus of investors and strategists who warn of an imminent change in market leadership.
According to the bank, a series of political and economic changes should slow the performance of technology stocks and boost roles that were left behind in the rally, such as banks and automakers.
The increase in bond yields, the expectation of approval of at least one vaccine against Covid-19 this year and the potential for a Democratic victory in the United States elections in November may lead to a reversal of fortunes for the sector that has been the stock market winner in the pandemic, according to a team analysis that includes Peter Oppenheimer released on Thursday.
Strategists cut the recommendation for technology stocks to “neutral” and raised roles of banks and automakers to “overweight”. They also downgraded the recommendation for food, beverage and tobacco stocks to “underweight”.
“In the coming months, we expect some political and economic changes that will support a temporary rotation; and these rotations can be quite significant, ”wrote the strategists. “Secular trends still favor growth or defensive growth actions.”
Technology stocks soared this year with investors betting on the resilience of earnings in the sector and the benefits of the remote work trend, while banks are challenged by reducing interest rates to record levels. The Nasdaq 100 index, with a strong weight in the technology sector, shows a 37% increase in the accumulated result for the year, compared to a 35% decrease in the S&P 500 Banks index.
The banking segment “is the most sensitive to interest and growth and, despite the low underlying returns in recent years, we believe it offers exceptional value”, wrote the strategists. “We downgraded technology to reflect our expectation of a short-term jump in value.”
Goldman joins banks like Citigroup in recommending value stocks, which have disappointed investors for the past decade.
Alexander Altmann, head of US stock trading strategy at Citi, said at a conference in Sydney this week that the US elections could put valuable stocks in focus once again.
Some quantitative investors say that the extent of earnings for growth stocks puts them at risk for a “Minsky moment”, a phenomenon in which a period of consistently strong returns generates recklessness among investors, which then becomes unsustainable and ends up collapsing. market.
“When bad things don’t happen for a long time, people are more comfortable,” said George Mussalli, co-director of investments and head of equity research at Panagora Asset Management. “We don’t know what the catalyst could be, the election could be a catalyst, but nobody knows.”
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