(Bloomberg) -- Goldman Sachs Asset Management is skimming off some of its profits from high-flying technology shares and putting the money into cheaper companies.
The firm believes tech shares will come under pressure and prefers areas like energy and Japanese shares, according to Alexandra Wilson-Elizondo, co-chief investment officer of multi-asset solutions. In her view, the US economy is on track for a soft landing, but there are plenty of risks that could change the trajectory.
“We like taking profits on technology and moving toward other sectors,” she said in a phone interview.
In the tech industry, “the risk-reward profile is skewed to the downside,” she added. “While we still believe in being long equities and having them in the portfolio, we think that there are some more attractive opportunities to access.”
Returns among the Magnificent 7 stocks have already started to diverge. While Nvidia Corp. has soared 72% this year, others haven't fared as well. Apple Inc. shares have struggled due to weak demand for iPhones in China, and Tesla Inc. is down 30% year-to-date on concerns over electric vehicle demand.
Goldman Sachs Asset Management, or GSAM, is holding an overweight position on energy shares as a hedge against inflation and geopolitical risks, said Wilson-Elizondo. So far this year, it's been a good trade. S&P 500 oil and gas companies are up 16%, compared with an 11% gain for tech shares.
She said they're still cautious on utilities and REITs, as well as small-caps because of their sensitivity to high-interest rates. Even so, some small-caps are attractive because of their cheap valuations and a few may be takeover targets for fast-growing AI companies.
“An active manager can add a lot of value in this segment of the market,” she added.
Japan is another area that Goldman is overweight due to corporate reforms, improving business sentiment and relatively low valuations. “Japan offers a nice opportunity to both a cyclical and structural story,” Wilson-Elizondo said.
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