has dropped by 6% over the past three days amid investor concerns about the durability of US economic growth. During this period, stock market volatility, as measured by theIn a Monday note to clients, Goldman Sachs strategists offered seven takeaways from the recent sell-off and surge in volatility:Their S&P 500 index target for year-end 2024 remains 5600 .
"Following the sharp recent move, the Cyclicals vs. Defensives pair now appears to reflect the roughly 2-3% real pace of GDP growth indicated by the 2Q GDP print and our economists’ 3Q GDP tracker,” Goldman noted.Defensive sectors, including Utilities, Communication Services, and Consumer Staples, historically perform best as the Fed begins an interest rate-cutting cycle.
"Within the equity market, the start of Fed rate cutting cycles are typically characterized by defensive sector outperformance, similar to the rotation that has occurred during the past week."Goldman Sachs highlighted its “basket of Stable Growth” stocks represents an attractive investment strategy for those concerned about a further deceleration in the US economy.
From this perspective, declining interest rates should relieve pressure on small-cap balance sheets and lower their cost of capital, strategists added. However, the majority of the recent decline in interest rates has been driven by weakening economic growth expectations, which has weighed on cyclical stocks, including small-caps.
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