How to find next year's US stock market "alpha" trend? Goldman Sachs provides an investment guide
Goldman Sachs analysts pointed out in a report that over the next six months, the materials, software, and services sectors in the U.S. stock market are most likely to outperform the market. They introduced a model to select industries expected to exceed the market by 5 percentage points, recommending an increase in holdings of healthcare, utilities, and real estate stocks. Although the materials sector faces weak economic growth and tariff risks, rising prices of gold and silver are expected to bring profits. The software and services sector will benefit from the application transformation of artificial intelligence
According to Zhitong Finance, analysts at Goldman Sachs stated in a report that U.S. stocks in the materials, software, and services sectors are most likely to outperform the market in the next six months. Goldman Sachs strategist David Kostin mentioned in a report on December 20 that they introduced a model for U.S. stocks to select industries expected to exceed the buy-and-hold index by 5 percentage points or more, "to identify 'high-conviction' views with significant alpha potential."
He stated, "Our model incorporates macro, fundamental, and valuation data as independent variables. We run probability models for each industry separately, only including variables that are statistically and economically significant. Our model does not consider changes in fiscal policy or long-term themes such as artificial intelligence."
The model rates the materials, software, and services sectors the highest and currently recommends increasing holdings in healthcare, utilities, and real estate sectors. Goldman Sachs noted, "Our model suggests significant defensive increases, partly because the current stock market has already digested optimistic sentiments about economic growth."
The materials sector did not participate in the cyclical rally this year, but some companies are expected to profit due to anticipated increases in gold and silver prices. Goldman Sachs stated, "Weak U.S. economic growth and tariffs pose risks to the sector. During the trade war in 2018-2019, materials performed poorly during key tariff announcements. However, the sector's lower initial valuations suggest that some pessimism has already been reflected in prices."
Software and services will benefit from the "handover" from one phase of artificial intelligence adoption to another—in this case, from building infrastructure such as data centers to AI-supported revenue. Goldman Sachs stated, "For those investors who may doubt companies' ability to monetize artificial intelligence, the return of investor focus on long-term growth not driven by AI may also translate into demand for many software and services companies."
