U.S. Equities Remain Valuable Options, Goldman Says

With the future of the economic environment remaining uncertain, investors are reevaluating what factors to prioritize when seeking large-cap opportunities.

In finding opportunities for investment, U.S. equities remain a solid choice. That’s according to Sarah Rich, vice president and lead portfolio manager at Goldman Sachs, who participated in VettaFi’s Equity Symposium on March 13.

“We do believe that U.S. equities continue to continue to remain attractive for several key reasons. No. 1, the U.S. represents 26% of global GDP. No. 2, we have the highest labor productivity in the world. And No. 3, persistent and diverse corporate earnings growth are a hallmark of U.S. equities,” Rich explained.

Past and Present

Along with present-day indicators, there is some historical precedent to keeping U.S. equities in a portfolio. Rich noted that U.S. equities have shown solid growth over the years. That’s despite periods of economic strife such as the global financial crisis.

While evaluating exposure to large-cap U.S. investments, Rich believes market-cap-weighted benchmarks can be backward-looking in nature, overweighing stocks that are overvalued while underweighting undervalued stocks. She noted that investors could risk underperformance by choosing to not invest in the top names in the market, as well as the danger of deviating from the benchmarks.

“Some other things to note among the mega caps is that dispersion of returns is actually at a 10 year high. It’s around 160% above the 10-year average,” Rich said. “So, in theory, that means when you get it right, you can really knock it out of the park. But we know that this is incredibly difficult to do in practice.”

Allen Bond, managing director and head of research at Jensen Investment Management, also participated in the panel. He agreed with Rich that investors who choose not to engage in large-cap U.S. investments face a great deal of risk.