Even in such an uncertain environment, some things look clear at this point, according to Goldman Sachs Chief US Equity Strategist David Kostin — namely, that investors'"Many of our thematic baskets also reflect some concern about the lending environment, but little panic regarding the broad growth outlook," Kostin wrote in a recent note to clients.
For instance, while energy stocks would be vulnerable in a significant economic slowdown, Kostin says"The Energy decline appears consistent with the Treasury market's pricing of large rate cuts later in 2023, but at odds with the resilient growth outlook that most US equities appears to be pricing," he said."We believe the sector has upside potential if economic growth remains healthy.
A side effect of the recent upheaval is that investors expect lower long-term interest rates, as more of them are convinced that the Federal Reserve will soon stop raising rates and will begin cutting them before the end of 2023. That's created an unexpected risk-on trade.