Recently, Goldman Sachs Asset Management released its mid-term outlook report. The report forecasts that due to slowing corporate profit growth and political concerns, the U.S. economic growth will decelerate to around 2% in the second half of the year, with U.S. stock market indices expected to remain largely flat.

Goldman Sachs Asset Management also warned that U.S. stock investors should start diversifying their investments and steer clear of early winners in the significantly appreciated artificial intelligence sector.

Steady Outlook for U.S. Stocks in 2024H2

In the report, Goldman Sachs Asset Management stated that it expects the U.S. economy to gradually cool off in the second half, which will further complicate the investment environment in the U.S. stock market.

Lindsay Rosner, Head of Multi-Asset Investments at Goldman Sachs Asset Management, commented that this is likely a soft landing, and investors could possibly see the Federal Reserve cutting interest rates in the second half of 2024.

She anticipates that the Fed could start cutting rates from September, with subsequent decreases likely at a pace of 25 basis points per quarter.

With the decline in Fed rates, she also expects benefits for the U.S. fixed income market. She noted particularly interesting opportunities in the high-yield bond market and structured credit sector.

Alexis Deladrier, Global Equities Portfolio Manager and Head of Developed Markets at Goldman Sachs Asset Management, predicted that due to overall slowing profit growth in U.S. stocks and increased political concerns both domestically and internationally, the U.S. stock market is expected to remain mostly flat in the second half of the year.

Steering Clear of AI Hot Stocks

It's worth mentioning that from the beginning of this year until now, the U.S. stock market has shown a highly concentrated trend: the growth of U.S. stock market indices has been predominantly driven by a few tech giants related to the AI theme (especially semiconductor giant NVIDIA).

Deladrier pointed out that in the first half of 2024, the rise in the U.S. stock market was mainly driven by five major tech giants, creating half of the U.S. stock returns from this singular trend.

He advised investors to further diversify their investments: "We believe you need to steer clear of these early winners in the AI sector."

Rosner added, "We see a slowdown in profit growth, and domestic and international political events could cause volatility in the U.S. stock market; uncertainty is the current state."

Goldman Sachs Asset Management believes that compared to U.S. stocks, Indian and Japanese stocks are particularly attractive at present because they benefit from various trends ranging from artificial intelligence to climate change. Deladrier also highlighted the attractiveness of corporate governance reforms in Japanese stocks.