- David Kostin told CNBC on Tuesday that technology will continue to grow and remain strong in the long term.
- His two reasons for this: the high growth potential tech stocks have in a recovery and the expectation of persistently low interest rates.
- The Goldman Sachs US equity chief also said cyclicals will benefit in the near term. But he said: “The fundamental argument of where the growth is happening still is in technology.”
David Kostin told CNBC on Tuesday that technology will continue to grow and the “fundamental argument of where the growth is happening still is in technology.”
The Goldman Sachs US equity chief said that he has a more optimistic economic outlook than the consensus. Goldman forecasts average annual growth for the US economy next year around 6.2%, he said, while the consensus is around 3.9%. Kostin’s advice for investors who want to position themselves against this backdrop of more growth is to remember that “the idea of better growth still rests with technology.”
Kostin explained that one of the reasons for this view is the high growth potential technology stocks have in a recovery. While in the near term Kostin expects cyclical stocks, financials, and industrials to be “beneficiaries,” in the longer term “is still where you get better growth out of technology.”
The strategist also said the expectation of persistently low rates is another reason why technology will continue to grow. Investors rotating into cyclical stocks are missing the “fundamental issue that interest rates are likely to remain extremely low.” He continued: “The idea of better growth longer term is what characterises the technology stocks more than anything else and the longer duration, the better growth long-term is more valuable, more prized in a low-rate environment.”
Kostin added that the uncertainty surrounding the election results and the potential for changes in policy and the tax rate are driving questions with clients at this time. “Everyone mostly on the buy-side, hedge funds, mutual funds, portfolio managers” has “shifted away from the vaccine” and expect an announcement of a successful vaccine by September or October, he said. The focus is now on the election. He said Goldman Sachs has factored in good news of a vaccine in the near future into their optimistic outlook.
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