Goldman Sachs AM: Investors are fleeing US stocks
Clients at Goldman Sachs Asset Management are increasingly asking the investment giant to move their money away from the US, bosses in the firm have warned.
“The US is not thought to be as safe and dominant as it was six months ago,” Matt Gibson, head of client solutions at Goldman Sachs Asset Management, told City PM.
The asset management chief said clients were increasingly asking the bank whether the US stock market rally had “run its course” and they should instead be looking to European and Chinese stocks.
Goldman Sachs is now forecasting that the US economy will grow around one per cent throughout 2025, down from its forecasts of 2.2 per cent at the start of the year.
“We’ve really seen investors broadening out their portfolio with down and out themes,” said Hania Schmidt, EMEA head of quantitative investment strategies at the firm, meaning clients were moving down the market capitalisation spectrum to smaller companies, and out of the US.
When asked whether clients were taking action to move away from the US, Gibson said: “Everyone’s thinking it,” though stressed that nobody he knew had fully exited investment in the country.
US stocks expected to underperform
In a survey of fund managers from Quilter today, a majority (53 per cent) of stockpickers expected US stocks to have the worst performance of any major market throughout 2025.
While US stocks have mostly recovered from ‘Liberation Day’, the Goldman chiefs explained that the market would truly begin to turn when the negative effects of the tariffs showed up in hard data, in particular the unemployment rate.
“The market share of retail investors has grown to one of the highest levels we’ve seen in recent history,” said Alexandra Wilson-Elizondo, global co-head of multi-asset solutions at Goldman Sachs AM.
“That is at risk the second you see the employment picture changes, because typically, retail investing goes hand in hand with how they feel about their jobs and the economy.”
Stocks outside the US were also increasingly seen as more desirable, as Schmidt explained that while the largest companies in the country are all “ultimately mega cap tech,” the largest companies in the UK and Europe were much more diversified across sectors, with “different macro themes that are driving them and different business models”.
Goldman favours Europe and the UK
The quant expert also said that due to market inefficiencies, Goldman’s investment analysts saw more opportunities to make significant returns from Europe and the UK.
“There’s actually a slower diffusion of information in European markets than what we see in the US counterparts,” she said. “There’s lower coverage, from an analyst perspective, less efficient information coming through.”
Another factor constraining the performance of American markets has been bonds, as “bond prices and yields are constraining the ability for equities to continue upwards,” argued Wilson-Elizondo.
The US 30-year Treasury bond yield has been hovering around five per cent since the beginning of Trump’s trade war, up from less than 4.5 per cent on ‘Liberation Day’.
“The psychological level of five per cent is important because I think it will put a cap on how equities trade from here,” said Wilson-Elizondo.