A senior executive at Goldman Sachs has expressed confidence in the resilience of the markets despite increased volatility and geopolitical uncertainties.
Speaking on Goldman Sachs’ podcast “The Markets,” John Storey, co-head of equities distribution, characterizes the current market environment as “fragile,” noting high levels of investor hedging and extreme volatility.
Despite these challenges, Storey is impressed by the strength of equities and remains optimistic about several sectors.
“Last June, I emphasized the European financials theme, which has shown remarkable resilience. With high single-digit PEs, double-digit earnings growth, and shareholder returns, along with ongoing earnings upgrades, I am still very bullish on this theme. Additionally, the shift from asset-light to asset-heavy sectors such as data centers, defense, mining, and materials presents great opportunities.”
Storey highlights the ongoing shift towards asset-heavy sectors, particularly those related to infrastructure and physical capital, as investors reconsider the long-term impact of artificial intelligence on business models.
He also reaffirms his confidence in the “picks and shovels” approach to investing in AI.
“The picks and shovels trade around AI has been very successful. As companies continue to increase their capital expenditure on AI, investing in infrastructure providers like semiconductors remains a solid choice.”
Storey emphasizes that while AI-driven productivity gains are expected, the earnings impact is still uncertain, making companies supplying AI infrastructure more appealing than end applications.
Looking forward, he advises investors to monitor developments in geopolitical conflicts, particularly in the Middle East, and U.S. labor market data, as these factors could affect growth expectations and market trends.
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