Expect a return to more “normal” investing where stock picking is rewarded, says Goldman Sachs

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, United States, February 15, 2022.

Brendan McDermid | Reuters

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Generation alpha is poised to return to the asset management industry as growth will be significantly less concentrated in a post-pandemic world marked by higher inflation and higher interest rates, according to Goldman Sachs.

“We are back to a more ‘normal’ cycle where we expect investors to be rewarded for making sector and stock market decisions related to potential growth versus what is valued,” said Peter Oppenheimer, chief global equity strategist at Goldman, in a note. “That should mean a return to Alpha.”

The current bull cycle has not been an ideal environment for stock pickers, as most stocks have fallen in unison on the rebound from the Covid-induced crisis. However, this market comeback has pushed valuations to new highs, particularly in the growth-focused tech sector, which could lead to lower overall returns and less tech dominance in the hawkish monetary era. , said the Wall Street firm.

Tech stocks, especially megacap names, have seen much stronger earnings growth than the rest of the corporate sector in recent years, Goldman said. FAAMG – Facebook (now Meta Platforms), Amazon, Apple, Microsoft and Google’s Alphabet – is now 50% larger than the entire global energy industry and nearly five times the size of the global automotive industry at the moment. exclusion of Tesla, according to Goldman.

“We believe we are entering a new environment where the influence of technology is rapidly expanding to touch virtually every industry,” the strategist said. “Going forward, it will become less easy to tell the difference between what is and what isn’t a technology company, and this should expand the opportunities in more sectors.”

The hedge fund industry could already be making a comeback as the community outperformed the market in a volatile January. Hedge funds lost 1.7% on average last month, compared to 5.3% for the S&P 500 in its worst January since 2009, according to HFR data.

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