YouSaid · the spoken record

Alexandra

lines on the record
27
first
2024-06-18
most recent
2024-06-18
sittings or episodes
1
sources
podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

  1. “Yeah, I think the one other thing to highlight is that there's certain themes that are persistent in the market narrative, but there's a lot more happening out there. And so to your point on being agile, sometimes it's just paying attention where nobody else is in certain corners and there's spaces that are going to really benefit from some of the larger themes that we're seeing. So we talked a little bit about commodities, but there's a lot of value of adding commodities to your portfolio right now. And in particular, we're looking at things like copper. which are going to be big players in the EV revolution supply we're expecting to be down over the next couple of years so i think the message we would add on to how well you articulated and concisely are you articulated our conversation is just keep your eyes open look in the corners there's a lot of stuff to be done right now christian alexandra thanks so much for joining us thanks for having us”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  2. “I think that's fair. I think we need to be clear that one wants to stay agile late cycle and one wants to watch the data. I think generally late cycle backdrops on their own are not that scary. Late cycle periods can last a long time. You can have the unemployment rate down at low levels for a very long time. Profit margins can stay high. But we need to watch momentum. And I think we are not worried, like both our economists and based on our business cycle framework, we're not worried about an unfavorable late cycle scenario. But I think we need to be a bit agile. I think that we are doing the best we can with building this, you could say, advanced 60-40 approach, but I think we need to recognize that relate cycle.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  3. “Yeah, we would agree with that analysis. And in fact, I think one of the things that's causing the reevaluation is because bond yields are so much higher that they have been over the last decade or so, which makes risk premium inequities look less appealing. That said, I think one of the things we're spending a lot of time on is just the shape of the bond curve. So we expect more demand for term premium or plainly stated that the more you extend out in lending that you should be compensated more than right now. We know the curve is inverted. And that should just be a reflection of what Christian mentioned, higher inflation risks, higher supply risk. And so over time, we do think that, yes, we'll have that ballast and that 60-40 concept is very important, but we continue to see the value actually in the front of the curve until we see that shape take more of a steepness.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  4. “And the real assets address the concerns regarding inflation, high inflation volatility, stagflation. But now comes the funny part. If you now take from the one-third real assets 20% or so, put it back into equities, because equities can be real assets if you buy the right equities. You can buy infrastructure, you can buy maybe even real estate at some point again, commodity equity, or you can buy companies with pricing power. That is also a real asset. So you put that back into equity, you're back at 5560, and then you take the rest from the real assets into tips, indexing bonds that are also having inflation protection, put it back into bonds. So you're back at 60-40, which we often end up at, and which has been the right asset mix for the last 150 years, but certainly not the last few years, but you have a 60-40 portfolio which is actually robust to a lot of the worries we hear from investors right now.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  5. “AI, we have several other innovations currently going on renewable energy innovation, healthcare innovation. And I think that is a problematic part of this portfolio. We can discuss that because growth equity are already a bit expensive. But still, if you do have that bullish scenario coming through, even from those valuations, you could argue that growth equity can still offer you very attractive returns.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  6. “Published this peace strategic balance bear looking at the next five to ten years, trying to understand the corner solutions, the most extreme scenarios you could see from a structural perspective. We discussed one of them already, the ultra-bullish AI scenario, but a lot of our clients, they are worried about more unfriendly scenarios like will we have higher inflation with less growth compared to last 20 years? Will we go to stagnation considering what's going on in China structurally what's going on in Europe? So this report goes through all these scenarios and then creates the optimal portfolios for those scenarios. You can then assign probabilities. What is the likelihood and try to create something that's robust for all of these different scenarios? So to answer your question Shortener, what's the optimal portfolio that we've arrived at? It's one third equity, which is with a tilt towards growth equity to capture the innovation. And I'm not just talking about”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  7. “A lot of attention lately as well in terms of the equity market there. So from our perspective, we believe in the Japan story. We think this is more of a structural than cyclical storyline that we want to have exposure to in our portfolios. You're seeing two separate dynamics. One is there's a very strong desire from the Japanese government to have real inflation and nominal growth in the economy. And at the same time, you've got a lot of restructural reforms happening within individual companies that would ultimately support better ROEs and better valuations. So you're going to see a little bit of volatility, especially with announcements from the BOJ in terms of what they're doing with bond purchasing and rate levels and the currency, but over time we do believe that this is still a nice valuation story and a way to get diversification into the portfolios. And if we cut through the noise.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  8. “What are your thoughts about Europe and beyond? I think similarly to what Christian was mentioning in terms of could be an opportunity to buy the dip as people trade on fear rather than actual outcomes. We do think that Europe is a space where you need more active management rather than passive exposure because of some of the things you mentioned, higher in value, more cyclicality, a lot more banks, autos, if you will. And so it's a place where you can add value to your portfolio, but we need to spend a little bit more time lifting under the individual names in the hood. And when we talk about the expansion of breath in terms of earnings, we do see potential for that to happen in Europe. And to your point, this is a really unique cycle because Europe cut before the Fed, which is rare. And that typically is supportive for risk assets. So cautiously optimistic is how I would characterize our view on European. And what about Japan, which has seen...”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  9. “I think we still think that the European equity market is offering good value here because you have a better cycle position, you have a few more optionalities for the cycle to extend. And there's a lot of value, like literally value, like valuations are cheap that can create restructuring, that can create releveraging. So now to your questions on the French elections. I think generally we would argue that elections will not materially alter the outlook for Europe and possibly even for France, if anything, there's a potential for gridlock. And the fact that you're now seeing that volatility emerge might actually be an opportunity to look at Europe and in particular look at opportunities in Europe that are under pressure even though they shouldn't be. Never forget that a lot of companies in Europe are very international. They're just listed in Europe but most of their revenue will be outside of Europe. And if they are coming under pressure just because of elections and elections come and go, we would actually see this as an opportunity to look at those.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  10. “Yeah, let me start. I think generally we've been in favor of international diversification in the last two, three years. And it's a feature that is usually quite valuable when you have higher inflation and high inflation volatility because it tends to drive more cycle divergence because there's more policy divergence. And that's exactly what we've seen. You could argue that Europe is from a macro point of view in a slightly better backdrop right now, a bit less hot, a bit less late cycle. There is kind of policy cuts. The ECB has actually already cut, which can create certain supports. So at the margin, we were kind of arguing for more international diversification, but it comes with risks, of course, because the US equity market does have the technology revolution at its core. And obviously has been incredibly strong performer, is a very liquid, large market. So we've been a bit more focused on Europe. And as you were saying, that's taking a bit of a hit recently coming back to the old problems of Europe where often there's a lot of political volatility that scares off.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  11. “Is that what you're seeing as well? Yeah, I think that was extraordinarily well articulated, in particular, I think that there's two types of hedging, if you will. There's the one where you're using options markets or you could be using currencies to protect your portfolio a little bit. But there's also the opportunity to rotate across assets. So for example, if you look at corporate credit, to your point, it's trading to the fact that corporations are doing extraordinarily well and it's trading very close to post-GFC tight levels. So you can hedge, if you will, your portfolio by underweight a little bit of that extra carry, which quite honestly is very minimal, and going into the rate market. So there's multiple ways that you can be adjusting your portfolio right now to protect it should you have any of these left tail type of events come to fruition. So there's been so much focus, at least as we said here in New York, on the S&P 500, and its record highs, but”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  12. “Yeah, I can start, and I'm sure Alexandra has views on this, but it is pretty cheap. And that's the good thing. I think the Vix's law, like equity volatility's law, but a certain other volatility is even lower, like FX volatilities particularly low. We see a lot of interest in using FX hatches into the elections, like, for example, long the dollar because there's a perception that certain election outcomes, especially related to trade tariffs and related to geopolitical uncertainty, could be very supportive of the dollar, but also positive drivers around elections like reflation and things like that, accelerating. All of that could be positive for the dollar.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  13. “Financial balance. So I think one of the unusual things this cycle is you have certain parts of the economy being very late cycle, like the labor market, profit margins, equity risk premium. But the private sector financial health is very early cycle. And it's a lot to do with the fact that you had this huge rise in inflation post-COVID recovery that pushed up rates that actually caused deleveraging. So normally what you tend to see is as you shift from mid-cycle to late cycle, corporates and households are extending themselves, they're levering up. But because rates have been so high going into the late cycle backdrop, you didn't really see that. You had a bit of fiscal help as well. So from that perspective, the private sector is in very good shape. And that actually increases the ultimate resilience of the economy. It's obviously still vulnerable to financial conditions, but it should be a bit more resilient. So we're less worried about the big shocks, but we want to diversify, look at selective hedges, private market.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  14. “The labor market data in selective consumer areas. And this is not the end of the world for the broad market, the equity market is not the economy, the economy is not just driven by these type of consumers. But I think, if anything, it is actually bad news is good news because it might help the Fed cut. But it does increase the vulnerability to shocks because if the macro backdrop is already a bit fragile, then adding external shocks like from geopolitics and politics is just not helping because it might create these vicious cycles between financial conditions and growth where equities take a set back, the market then worries about growth that further weighs on equities. So we've also been focused a bit on hedging. It's been more soft, not to the extent that we would recommend worrying about large equity tales like 10% plus drawdowns because we just think the economy is too good for that. And I think one important metric we're watching there is the private sector.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  15. “I think we've been very focused on the summer period and hedges and the run up to the US elections. As I mentioned at the beginning, a lot of our concerns has been the strong rally how the sentiment has evolved and where the positioning is right now. I think a few weeks ago our risk appetite indicator, which aggregates 27 risk premium pair traits across assets, it was at one of the highest levels we've seen since the 90s. It's come down since because you had already a bit of volatility to be clear. But I think we definitely think hedging into the summer makes sense from two perspectives. I think Alexandra already mentioned it. We have a slightly weaker data backdrop in the US right now. We're starting to see macro surprises turn a bit more negative and they stayed negative. Yes, we had the inflation relief recently, slightly better inflation data, but if you look underneath the surface, it was driven by consumer related categories, which kind of shows you what Alexander already mentioned. We start to see a slightly weaker patch.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  16. “Overall, structurally, we don't think that there's going to be a material change in the deficit, but it's going to come from different places and different levers moving around, some of which could be highly inflationary if you think of things like increased levels of trade wars and trade dynamics. So from our perspective, it's going to be important to have different hedges and diversification in the portfolios. Some of them we talked about can be bonds, although bonds are exposed to supply risk and some of the rhetoric that could come out of the different policies. But moving towards some of the illiquids, so privates and portfolio diversification in the private sectors, and then equally, if you think VAL is going to increase, that's not necessarily a bad thing. There's a lot of opportunity for alpha. So having active management in the portfolio or even things in the liquid space like hedge funds who can take advantage of some of these dislocations will be really important.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  17. “Percent probability that it's more soft, we will learn over time how good it could be. And that narrative is critical for market pricing. So we'll see that in particular with the results from specific companies. You saw that when Apple announced incorporating AI in Siri, I think these are all very important announcements for the market because they're trying to put together the AI mosaic. So I think it matters a lot.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  18. “Productivity growth that means GDP growth goes up without inflation, profitability might go up, and it allows us to model like, let's say, AI is a super success. How much is left in equities considering where valuations are right now? And if we go for a soft Goldilocks AI scenario, we call it, we think that's probably priced. So if you look at the long-term return forecast right now for a soft AI scenario, the long-term returns are in line with the long run average, which means that if you get paid the long run average returns, it means the market reflects those macro conditions. But if you go a bit more in the direction of our economists, and you might remember the famous 150 basis points improvement of productivity growth over the next decade, I think that is not reflected yet, we would say. So I think the market in the next few weeks and months will essentially look in probabilities. It will put 10% probability that this will be the super optimistic one. It will put 30%...”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  19. “Think that equities are pricing an excessive AI optimism, but there is some AI optimism priced in. There's different ways to extract that. You can look at the long-term impact growth rate in the S&P 500, which you can back out via the equity risk premium. That looks a bit elevated. And if you're late cycle and expect earnings growth in perpetuity to be high compared to history, that must mean you're expecting some structural boost. And I think what we've also done recently, we've published a new report that looks at structural regimes and how they affect portfolios and valuations. And it allows us on one hand to forecast in case certain structural changes are happening what will happen to equities to bonds and also extract what the market is potentially pricing. And we have an AI scenario in there where we look at essentially different changes of productivity growth, like similar to what the rest from our economists have been. They expect a significant pickup.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  20. “It matters quite a lot from two perspectives. I mean, first of all, you have a large part of the equity market in the US, the magnificent seven. I think being very closely associated with that theme. So as a result of that, you do have a bit of concentration risk, you could say. But it also matters from the cycle position. When you're late cycle, often there's two residual drivers that you're left with when the economy is running out of runway. One of them is relveraging, restructuring the corporate sector becoming more efficient. The other thing is optimism about a structural driver, like a tech revolution. And that can become a really important driver late cycle and can also drive material valuation overshoots. And we've seen that in the tech bubble. And then obviously when the AI optimism fades, you're very vulnerable to the extent that even the tech bubble bursts more or less cause the recession. The good news is, as we mentioned, we don't think that's the case right now.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  21. “And that's just based on the thought process that pauses are more supportive for equities than for the rate market. And we continue to expect to see high levels of rate fall just because we are so data dependent. So with each print that is nonlinear, you're going to see the market trade around. Even recently, we've come back about 50 basis points from the highs. Our expectation is you're going to start to see a little bit more of that play through the rest of the year. But that, to what Christian mentioned, bonds are back and income is a really important buffer to a portfolio. And so depending on what the client is looking for, we do believe that it provides that strong balance. So talking about that AI trade or that AI focus, obviously, as both of you have alluded to, there's been tremendous optimism around that theme. Christian, what happens if that enthusiasm fades? How important has that been to this market performance?”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  22. “To see things like job openings decline materially. So we saw something, the lowest print in the last three years. And a lot of the stress and tension that's been at the nexus of the growth inflation dynamic has been in the labor market. So that does give us some confidence that we're at least moving in the right direction. And we do expect disinflation to start to reassert itself again, which we recently saw in both CPI and PPI prints. And spot data that starts to roll in a little bit lower than expectations. And recently, the Fed put expectations back up to a pretty high level. We'll give them the opportunity to do non-recessionary cuts. And that backdrop should be really supportive for risk assets. And so if you think about your asset allocation recommendations, Christian is sticking with a risk on view. What's your view? Yeah, we continue to be risk-on and quite simplistically. It's equities over bonds.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  23. “And Alexandria, if I recall correctly, you were also bullish, as I said, but maybe a little bit more concerned about growth risk when we spoke several months ago. Where do you stand now? We agree similarly to what Christian mentioned, that the macro backdrop is supportive, but we don't think it's going to be as easy in the second half as it's been in the first half. And by that, we do expect VAL to go higher. I mean, look no further than the currency markets recently, which have been an expression of some of the political drama that's starting to play out in the different election cycles to see that we need to continue to expect the unexpected here. But that said, like zooming out big picture, we continue to see a benign macro backdrop, and that's going to be driven by softer, not soft macro data. Christian mentioned some of the components of the labor market, like the unemployment rate, which still remains low at around 4%, but you are starting.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  24. “The multiple right now looks high compared to the last 150 years, but so is the ROE. So I think the valuation discussion is not that clear as a reason to be bearish, but recently we've seen sentiment positioning indicators turn quite a bit more bullish. And that has made us just in the last few weeks a bit wary about going into the summer. There's a few catalysts I'm sure we're going to talk about that can potentially drive a bit of volatility. But it's not to the extent that we would change an asset allocation aggressively because of that.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  25. “I think listen valuations are a difficult story late cycle. What we actually found is often in late cycle backdrops, and there are certain elements of the business cycle that look late cycle right now, like unemployment rates are really low, profit margins are high, output gaps have been positive, risk premium low. And that's a common feature late cycle, and often you have valuations late cycle being a bit more elevated. And at the margin that constrains your long-term return potential, but it is not such a good market timing signal. And from that perspective, the valuations are high, but we're not really taking that as a reason to be extra bearish compared to the macro conditions. I think what is important as well is that we've built this new fair value model for the S&P. And if you control for profitability, yes, valuations are high, but they're not that high because you have to consider that right now the ROE for the S&P 500 is one of the highest we've seen in 150.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  26. “I think so. I think at the margin, growth is pretty solid. Inflation is still coming down even slower. You have rate cuts on the horizon. I think that's generally a backdrop where we want to be invested. And that was the key message. Of course, as you said, it's been a very strong rally. So what we've been recently in the last few weeks a bit worried about is positioning in sentiment, and we can talk about that. But generally, I think the macro conditions are still supportive to take risk. We shouldn't forget that we're still having a few technology revolutions going on that also helps, and that's typical when your late cycle. I think it helps to make in a late cycle backdrop equities perform because you run a bit out of earnings growth usually. So if you still have some structural help that can support equities. And I think one important thing we said last time, which I think is still true, is you can take a bit more risk because the bond mark is likely to buffer you in case something goes wrong. And I think that was one of the key messages.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT

  27. “It's been a terrific start the year for investors. U.S. stocks have surged to all-time highs outperforming even the most optimistic expectations. Meanwhile, bonds and even cash are offering substantial levels of yield. But are cracks forming under the surface? And how should investors position for the second half of 2024? The macro backdrop is supportive, but we don't think it's going to be as easy in the second half as it's been in the first half. I'm Alison Nathan, and this is Goldman Sachs Exchanges.”

    2024-06-18 · Goldman Sachs Exchanges · 2024 midyear outlook: building portfolios for a more volatile macroeconomic backdrop · IDENTIFIED FROM THE TRANSCRIPT