Banking giant Goldman Sachs says investors are quietly moving out of AI and tech names and into more defensive sectors.
In a new episode of the bank’s This Is the Markets podcast, Brian Garrett, head of equity execution on the Cross Asset Sales desk in Global Banking and Markets, says investors are still bullish on the stock market despite its recent dip.
But Garrett notes that he’s seeing data indicating investors are selling tech stocks to accumulate names in other sectors.
“We continue to see investors be long equities, but there is a rotation between the highest flying, higher vol information technology sectors into the more defensive sectors: healthcare, financials, industrials. And so while people are still long equities, they are definitely not going 80 miles an hour in the left-hand lane anymore. It is more like going 55 in the middle.”
Garrett notes that positioning data pulled from recent mutual fund and hedge fund filings highlights an area of quiet strength.
“I think there is durability in earnings, and I think that there is under-positioning. Again, Goldman Sachs research just came out over the weekend, and we look at filings from both mutual funds and hedge funds. The sector where both are the most overweight is actually healthcare.”
As for Garrett, he thinks that the current market conditions warrant a diversified portfolio rather than concentrating on previous market winners.
“I want to diversify away from some of the high-flying TMT (tech, media, telecom) names, and I want to get a little bit more defensive. Very simple way to do that, which we have seen is rotating from S&P market cap weighted into S&P equal weighted. So the equal weight S&P index is 15% financials, 15% healthcare, 15% industrials. You still have 12% tech, so it is not like you are not invested in tech. You are just not benchmarked to the Mag 10.”
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