The stock market hit new all-time highs last week, but one Goldman Sachs executive warns that the new momentum could witness some bumps in the road.
In a new interview, Goldman partner Bobby Molavi analyzes whether traders should fade or chase the rally that materialized last week.
“I think it’s still hard to imagine or believe that the market has been so resilient, given the various things we could worry about. You know? Oil’s back in 1992 dollars. But it’s not back to where we were pre-crisis. Obviously, rates now have kind of normalized a little bit. But the hiking versus cutting dynamic still is probably going to result in cuts coming through slower or later than people hoped for.
So, I think it’s delicately poised. I think the market still is pinning itself to the kind of AI capex story. Some of those tailwinds I mentioned, particularly fiscal, when it comes to Europe. Some of those kinds of second-order themes, for example, AI capex and AI disruption. And some of the value propositions in efficiency and productivity from that. But I think we’ve moved a long way. We are basically pricing in 5 the conflict being resolved. I think there are still some marginal risks of a blip along the way. So, fade the rally, if I had to choose.”
Molavi also notes that he’s focused on the “Heavy Assets, Low Obsolescence” (HALO) theme, which involves investing in assets that are considered resilient to disruptions from artificial intelligence.
“I think that in areas where it’s impossible to kind of decide or accurately product terminal value, it’s going to be really hard to kind of know where certain stocks should trade in terms of multiple or trajectory. But I think scarcity is being redefined. And we’re realizing there are a bunch of things the world needs. Oil being just one example. Hard materials, heavy goods being another, that have been undervalued over the last few years. And the kind of value of those goods in terms of supply chains and companies for key component parts for things like chip manufacturing, is being proven out in recent times. And I think that theme has further to run.”
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