Goldman Sachs has just made available its mid-year 2024 outlook. It summarises markets performance so far this year and highlights their forecasts for remainder of 2024. They point out that recent US earnings seasons were better than expected, with the Magnificent 7 driving S&P 500 ($SPY or $SPX500) growth, though some of the Magnificent 7 performed better than others. At the same time they indicate the latter half of 2024 may offer investors opportunities to expand beyond these large names.
One of the obvious areas of potential interest is growing number of companies that may be AI beneficiaries. However in some other research Goldman Sachs actually reflects that: “Daron Acemoglu, Institute Professor at MIT, estimates that only a quarter of AI-exposed tasks will be cost-effective to automate within the next 10 years — which means that AI will impact less than 5% of all tasks and boost US productivity by only 0.5% and GDP growth by 0.9% cumulatively over the next decade.”
The other areas are US small caps that are anticipated to rebound due to attractive valuations, an improving macroeconomic outlook, and potential interest rate cuts. Historically, policy easing has favored small caps, which may benefit more quickly from rate reductions due to higher floating debt levels.
Finally looking outside the US, European equities look promising due to improving growth, inflation, and corporate earnings. European small caps may benefit from early rate cuts and moderating inflation. Furthermore, according to Goldman Sachs Japan's markets (which I overweight in my portfolio, e.g. $EWJ and $XDJP.L) strong equity performance is expected to continue, driven by structural shifts and corporate reforms.
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