Goldman Sachs’ view on various sectors
In the previous part, we discussed that Goldman Sachs (GS) thinks that the S&P 500 Index’s (SPY) earnings growth will be lower in 2Q17. The investment firm also said that the energy sector’s (XLE) earnings growth will be weaker.
In 2Q17, Goldman Sachs thinks that the technology sector’s (XLK) earnings growth will be impressive, followed by the financial sector (XLF) (VFH). David Kostin, an equity strategist at Goldman Sachs, said that “secular growth” technology stocks have the potential to provide a strong return. In June 2017, he advised investors to focus on secular growth technology stocks. Kostin thinks that the demand for technology will stay high among consumers during the moderate growth environment.
Kostin also said that the financial sector is expected to provide strong 2Q17 earnings after the technology sector. Financial stocks are expected to provide a strong return to shareholders in the form of higher dividends and buybacks.
Recently, we saw that 34 major financial banks cleared the bank stress test, which was organized by the Fed. JPMorgan Chase (JPM), Morgan Stanley (MS), Wells Fargo (WFC), Bank of America, Goldman Sachs (GS), and Citigroup have more than the required level of capital.
These major banks have enough capital that could be distributed to their shareholders. They could tackle any situation if a financial emergency arises. The Fed’s gradual rate hike process could be a welcome step for the financial sector. The gradual rate hike could increase banks’ profit margin.
In the next part of this series, we’ll analyze Goldman Sachs’ view on the S&P 500 Index.