Goldman Investor Looks Past Tech Selloff to Laggard Stocks
Goldman Investor Looks Past Tech Selloff to Laggard Stocks
(Bloomberg) -- A Goldman Sachs Group Inc. asset manager remains optimistic about equities, despite the recent selloff in technology stocks and is waiting for laggards to catch up with the gains as economic growth picks up.
“We are still looking for a wider participation in the equity market rally, which will reflect broader-based economic improvement,” Shoqat Bunglawala, head of global portfolio solutions for EMEA and Asia Pacific at Goldman Sachs Asset Management, said in a phone interview.
“Rather than focusing on short-term vulnerability in tech stocks, which are likely more a function of the significant run-up that we’ve seen recently, we think it’s important to look at whether we see broader participation across sectors in equity markets to see whether they catch up,” Bunglawala said.
The $1.8 trillion fund manager is weighing in on the debate after last week’s plunge in the Nasdaq 100, led by the likes of Apple Inc. and Amazon.com Inc., made market players wonder whether this is the start of a bigger correction in some frothier valuations. The more than 50% rally in U.S. equities from their March lows has been fueled largely by a handful of technology giants, seen as among the biggest winners from lockdowns and increased internet use.
Bunglawala, who correctly predicted in early March that investors should brace for more losses because of the Covid-19 pandemic’s wide-ranging economic damage, is identifying smaller and cheaper value companies to join the rally in stocks after they lagged growth and defensive names for most of this year. Improving economic activity and supportive low-rate policies are generally favorable for equities, he said.
The Nasdaq 100 Index extended last week’s losses on Tuesday, tumbling as much as 4.2% after U.S. markets were closed on Monday for a holiday.
While Goldman’s global portfolio solutions group favors U.S. equities over the rest of the world, it has some tactical exposure to European cyclicals and Bunglawala says European stocks can benefit from improving global growth.
Like most investors, Bunglawala is keeping an eye on progress in developing a Covid-19 vaccine and says that the sooner-than-expected approval and dissemination of a vaccine would give risk assets an additional boost.
“The overall outlook is constructive, though we remain mindful of downside risks and that’s why we have a neutral stance toward long-term strategic asset allocation weights,” he said. “We do think there are returns that can continue to be achieved from risk assets given the improving economic outlook.”
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