Investors are abandoning U.S. equities, as per Goldman Sachs Asset Management.
Goldman Sachs Asset Management clients are demanding that their money be withdrawn from the U.S. market, the investment firm's executives have disclosed. This shift stems from a growing perception that the U.S. is becoming less secure and influential, according to Matt Gibson, head of client solutions at Goldman Sachs Asset Management.
Speaking to City AM, Gibson noted that clients were increasingly questioning whether the recent rally in the U.S. stock market has reached its peak and whether it would be more advantageous to invest in European and Chinese stocks instead. Goldman Sachs now anticipates that the U.S. economy will expand by just one percent throughout 2025, a significant downgrade from its initial projection of 2.2 percent for this year.
Hania Schmidt, EMEA head of quantitative investment strategies at Goldman Sachs, added that investors are broadening their portfolios by favoring smaller companies and reducing their exposure to the U.S. market. Schmidt explained that this evolution signifies a movement away from mega-cap tech companies, which dominate the U.S. market, toward more diversified opportunities in the U.K. and Europe.
According to a survey of fund managers by Quilter, nearly half (53 percent) of stock pickers expect U.S. stocks to underperform other major markets in 2025. This prediction comes as the U.S. market continues to recover from 'Liberation Day,' but is expected to suffering more substantial setbacks when the negative effects of tariffs start to manifest systematically, particularly in employment rates.
Alexandra Wilson-Elizondo, global co-head of multi-asset solutions at Goldman Sachs AM, pointed out that the expansion of the retail investor market to an all-time high could be at risk if employment conditions change, as retail investing often aligns with the sentiment of investors regarding their jobs and the economy.
Europe and the U.K. are emerging as more attractive investment destinations due to their broader market diversification and the presence of different macroeconomic factors and business models. According to Schmidt, European markets offer greater opportunities for significant returns because of market inefficiencies, less analyst coverage, and slower information diffusion compared to U.S. markets. The high yield on U.S. bonds, as perceived by Wilson-Elizondo, is also restraining the upwards growth of equities.
For more than a year, the U.S. 30-year Treasury bond yield has remained stable at around five percent, marking a significant increase from less than 4.5 percent on 'Liberation Day.' This development carries implications for the further movement of equities, with Wilson-Elizondo suggesting that the five percent psychological level could act as a ceiling for stocks going forward.
Investors are broadening their portfolios by favoring smaller companies and reducing their exposure to the U.S. market, as they seek more diversified opportunities in the U.K. and Europe. According to Hania Schmidt, European markets offer greater opportunities for significant returns due to market inefficiencies, less analyst coverage, and slower information diffusion compared to U.S. markets. Nearly half of stock pickers expect U.S. stocks to underperform other major markets in 2025, as they perceive high yields on U.S. bonds as restraining the upwards growth of equities. The U.S. 30-year Treasury bond yield has remained stable at around five percent, potentially acting as a ceiling for stocks going forward.
