Goldman Sachs AM eyes small caps after selloff

Goldman Sachs Asset Management, which manages over $2 trillion in assets, is looking to buy tech and small-cap stocks following the U.S. equities selloff and amid an expected normalization in rates.

Details

“What we’re looking at now is: can we buy some select tech names and the small-caps space,” said Luke Barrs, global head of fundamental equity client portfolio management at Goldman Sachs AM, in an interview with Bloomberg TV. The selloff in U.S. equities has “removed a lot of the froth,” making these assets attractive again, noted Barrs. Another supportive factor is the expected normalization in rates, with Goldman, according to Barrs, expecting three rate cuts from the Fed by the end of the year.

Context

The last month has been turbulent for U.S. stocks in particular and global equities in general. The second half of July was marked by what some analysts saw as a rotation out of Big Tech and into small- and mid-cap stocks, driven by concerns that tech giants might be overvalued. Against this backdrop, by the end of July, the outperformance of the Russell 2000 index, which comprises small caps, versus the tech-dominated Nasdaq Composite index was the widest in over 20 years.

Then, on August 5, a global selloff ensued following a disappointing U.S. jobs report. The move lower was short-lived, however: over the last five days, the Russell 2000 was basically flat, while the Nasdaq Composite has gained 3.19%.

Michael Hartnett of Bank of America believes that the turbulence in global markets has not yet reached critical levels. He expects leading AI companies to face headwinds later in the year should they fail to boost earnings.