Goldman Sachs Maintains Cautious Stance on Equities Amid AI Boom

Goldman Sachs’ Fixed Income, Currency and Commodities (FICC) team has returned to a “seven on ten” rating on the domestic equity market, according to Anshul Sehgal, global co-head of the team. Sehgal stated in a recent interview that the team had raised its equity positioning to a “nine on ten” following attractive valuations, but pulled back after the recent market rebound.

Equity Positioning Strategy

Sehgal explained the rationale behind Goldman’s cautious approach: “We do want to ride the wave. We think it is a big question mark in terms of how far the domestic equity market goes. Remember, like these seven companies, or US tech companies more broadly, do have a monopoly in the free world on these technologies. And these will be deployed very broadly, not just in the United States but the entire world. And they do have the potential to really change how life works. So, we want to be invested. But we’re back to a seven on ten waiting for better entry points to take it up again.”

According to Sehgal, Goldman’s team plans to trade the equity theme by increasing positioning when valuations become more attractive, rather than deploying capital at current levels.

Sector Allocation Breakdown

Goldman has rotated allocations across multiple sectors. The team’s current positioning stands at:

• Technology: 7 out of 10
• Energy: 3 out of 10
• Defense: 2 out of 10
• Fixed Income: 0 out of 10

Sehgal noted that fixed income lacks the growth trajectory necessary for Goldman’s strategy: “They aren’t interested in bonds because of their lack of growth trajectory.”

Energy and Defense as Secondary Themes

Sehgal stated that the team rotated some of its excess technology allocations into energy and defense sectors. “Energy security is a big thing. So, we like energy. So, that’s where we’ve rotated some of our excess that we had deployed in tech. We think energy security, both because of AI, and geopolitics, is going to be a dominant theme. Defense, similarly.”

However, Sehgal emphasized that neither energy nor defense presents opportunities comparable to artificial intelligence. “None of this is going to change very much. None of these are as exciting an opportunity as AI is. AI is a generational thing. These are trades. So, we’ve rotated some of our allocations in that manner.”