Understanding the Market | Why "Stay Invested" in 2024?

Zhitong App has learned that Goldman Sachs believes that the private equity market may perform well in 2024. A senior executive at Goldman Sachs believes that the US stock market and the private equity market may perform well this year; on the other hand, it is best to avoid commodities due to volatility. Stefan Bollinger, Co-Head of Goldman Sachs EMEA, said last Thursday, "We are optimistic but also cautious. We have seen the best returns in the US stock market, and we are very optimistic about the private equity market (investing in unlisted companies). But I want to say that we may be more concerned about inflation and the prospects of central bank policies than some others."

The US and UK economies showed much greater resilience than expected in the second half of 2023, while inflation was lower than expected. As a result, there were many buyers in the stock market, and people hope that major central banks will lower key interest rates in the first half of 2024, which greatly boosted the stock market at the end of last year.

The ultimate investment method: "Stay invested"

This is the first rule that Bollinger recommends to Goldman Sachs clients, even in a downturn. He pointed to 2023, when the US stock market rose more than 25%, despite concerns about the global economic situation, high inflation, and rising borrowing costs limiting investment in various sectors.

Bollinger said, "It's hard to say when it's a good year and when it's a bad year. If you look back over the past 20 years, if you think about, for example, the best years for private equity investments; those are the years you theoretically shouldn't invest: 2008-2009 were very good years. We believe that there is still a lot of room for market development, especially in the US."

Interest in investing in generative artificial intelligence (AI)

Before determining whether AI-related stocks are overpriced, the real question that needs to be answered is when and how this technology will change productivity and what it can bring. In a report published earlier, Goldman Sachs stated that generative AI could increase global GDP by 7%. Bollinger explained, "We released a research report stating that in the next 10 years, we will see a 1.5% increase in productivity, which will translate into 7% annual GDP growth." He added that the annual growth rate of the US economy over the past 20 years has been around 2%.

The question is how long this will take. As for when it is worth investing, looking at the success stories of the technology industry in the past, Bollinger said that the ones worth investing in are usually "not the early adopters, but the others who eventually become winners."

ESG takes a back seat amid commodity volatility

Due to the many uncertainties in geopolitics, the commodity market has been extremely unstable, so Goldman Sachs does not see it as an investment opportunity. However, Bollinger said that it needs to continue to be monitored as part of investors' "tactical views." There is no denying that with energy security becoming a major issue, the current risk of price shocks is much lower than at the beginning of the Russia-Ukraine war. Bollinger pointed out that at the same time, environmental, social, and corporate governance (ESG) have gradually faded from people's attention in recent years, as companies have started to see them as their main focus. He said, "Although the priority of ESG may have decreased in the minds of some investors, I actually think it is the right thing to do now because everyone has a business focus. Everyone wants to do something that truly makes an impact, rather than doing something that has already been done and doesn't actually solve the problem."