cnbc.com
Goldman Sachs Favors US Equities in 2025 Despite High Valuations
Goldman Sachs' Investment Strategy Group advises maintaining an overweight position in US equities for moderate-risk portfolios in 2025, despite high valuations, citing projected US earnings growth exceeding European growth and arguing that valuations are poor short-term indicators; this strategy includes trimming foreign stock exposure and diversifying into alternatives.
- How does Goldman Sachs account for the high valuations of the US stock market in its 2025 outlook?
- The recommendation to favor US equities stems from Goldman's projection of sustained US earnings growth outpacing other developed markets, particularly Europe, in 2025. This advantage, coupled with the argument that current valuations are not a reliable indicator of near-term market performance, underpins their portfolio strategy. The high valuation of the S&P 500 (P/E ratio of 27.49) is acknowledged but downplayed as a short-term timing factor.
- What is Goldman Sachs's recommended investment strategy for moderate-risk investors in 2025, and what factors justify this approach?
- Goldman Sachs' Investment Strategy Group recommends maintaining a US equities overweight position in a moderate-risk portfolio for 2025, despite high valuations. They argue that current valuations don't reliably predict short-term returns, and project continued US earnings growth exceeding that of Europe. This strategy involves trimming foreign stock exposure and diversifying into alternatives like private equity.
- What potential economic or market factors could significantly affect the success of Goldman Sachs's recommended investment strategy for 2025?
- Goldman Sachs' strategy acknowledges the elevated valuations in the US market, but anticipates that the earnings advantage of US companies, particularly in the tech sector, will persist into 2025. However, the outlook is contingent on interest rate movements; projected Federal Reserve rate cuts could be affected by economic data like the recent jobs report, potentially impacting the effectiveness of this investment strategy. A key risk is that high valuations, even if not immediately impacting 2025 returns, could negatively affect long-term returns.
Cognitive Concepts
Framing Bias
The article frames Goldman Sachs' optimistic outlook as the central narrative, presenting their arguments prominently and favorably. The headline, while not explicitly biased, implicitly suggests a positive recommendation for U.S. equities. The use of phrases like "eye-watering valuations" is presented as something not to worry about, shaping the reader's perception toward accepting the firm's viewpoint.
Language Bias
The article uses some loaded language. Describing stock valuations as "eye-watering" carries a negative connotation, yet the article immediately downplays this concern. Phrases like "big rallies" and "faster growth" have positive connotations and may subtly influence reader perceptions. The use of "in theory" when discussing earnings growth qualifies a positive claim and adds balance.
Bias by Omission
The article focuses heavily on Goldman Sachs' perspective and doesn't include dissenting opinions from other investment firms or economic experts. While acknowledging high valuations, it omits discussion of potential risks associated with these valuations beyond a brief mention of long-term impacts. The article also doesn't address potential geopolitical or macroeconomic factors that could negatively affect U.S. equities in 2025.
False Dichotomy
The article presents a somewhat false dichotomy by framing the choice as either staying overweight in U.S. equities or diversifying into alternatives. It doesn't fully explore other potential investment strategies or consider a more nuanced approach to portfolio allocation.
Sustainable Development Goals
High valuations in the US stock market, compared to other developed markets, could exacerbate existing economic inequalities. The report highlights that the higher valuations are partly due to higher earnings growth for major US companies. This disparity in growth between US companies and companies in other developed markets could worsen income inequality on a global scale. While the report suggests this may not be a major issue in 2025, the underlying trend of unequal growth remains a concern regarding long-term impacts on global inequality.