Goldman Sachs "Investment Opportunities in Bonds and US Stock Market Next Year"

Attractiveness of Bonds and Commercial Mortgage-Backed Securities
Stock Investment Strategy Balancing Large-Cap and Mid-Cap Stocks

Goldman Sachs Asset Management published the report "2025 Asset Management Outlook: Reasons for Recalibration" on the 20th, advising global investors to pay attention next year to bond and equity diversification, private market return potential, and improvements in real estate conditions.

Alexandra Wilson-Elizondo, Co-Chief Investment Officer (CIO) of Goldman Sachs Asset Management's Multi-Asset Solutions division, stated, "While most markets are expected to cut interest rates next year, rates will not fall to the historically low levels seen in the past," adding, "We expect gradual rate cuts by central banks to lead to sustained economic growth, but tail risks could disrupt the balance of economic indicators."

She continued, "In the case of the United States, if political uncertainties are resolved and the Federal Reserve maintains an accommodative policy, the economy will continue to grow," explaining, "However, if changes in tariffs and fiscal policy lead to inflation, the Fed may halt rate cuts."

Traditionally, markets have invested in bonds during periods of rate cuts. Since the U.S. Federal Reserve is expected to cut rates in December this year and early next year, and other central banks are also likely to pursue easing policies next year, bond profitability is expected to increase. However, the key factor will be the policies implemented by the second administration of Donald Trump in the U.S., and if inflation rises, the pace of rate cuts may slow down.

Next year, aggressive share buybacks and M&A are expected to expand bond demand. Commercial Mortgage-Backed Securities (CMBS) are considered the most attractive, with AAA- and BBB- rated securities spreads offering investment value compared to fair value assessments. The rapidly growing green bond market also warrants attention.

The U.S. equity market, despite risks related to concentration in some large-cap stocks, remains the most attractive market. A balanced strategy between large-cap and mid-cap U.S. stocks next year could yield good results. Small-cap stocks have sometimes outperformed large caps during rate cut periods due to lower interest burdens.

Following the recent U.S. presidential election, investor interest has focused on domestic-oriented companies, driving the New York Stock Exchange higher. Attention should be paid to growth-oriented policies such as corporate tax cuts and deregulation, which are part of the legislative agenda of the second Trump administration.

Outside the U.S., healthcare, green energy, and luxury brand companies' stocks are attractive. Asian stock markets, including China, are expected to be significantly affected by the U.S.'s new tariff policies. The Korean and Taiwanese stock markets have many semiconductor companies critical to AI development. The Japanese stock market has seen index gains driven by strong earnings and corporate governance reforms, but investors should also consider cases where the opposite occurred. India is still regarded as having strong fundamentals.

The private market continues to grow steadily as various demands emerge to complement exposure to traditional investment markets. Next year, as the macro investment environment stabilizes, favorable conditions will be created for buyout private equity funds, with exits and new investments expected to be active depending on the industry.

In venture capital and growth equity, valuations and growth expectations have normalized across various markets. This has created a constructive investment environment for highly innovative growth companies, and as venture companies maintain their unlisted status for longer periods, the need for growth equity capital is increasing.

In the private credit market, companies with debt are increasingly obtaining additional loans or adjusting interest rates on existing loans. Therefore, interest rate cuts are expected to be a positive factor for the private credit market.

After an unprecedented period of rate hikes, most central banks are lowering rates, improving liquidity in the real estate market, increasing transaction volumes, and raising values. The real estate investment environment is very optimistic for the coming years, with value increases expected to be prominent in areas with favorable supply and demand.

As investment opportunities expand, sustainability is gaining attention. For global decarbonization efforts to make substantial progress, capital must be invested in high carbon-emitting industries such as cement, chemicals, and steel.

Meanwhile, Goldman Sachs Asset Management is a key investment division of Goldman Sachs, providing investment and advisory services to leading global institutions, financial advisors, and individual investors in both public and private markets. As of September 30 this year, Goldman Sachs manages and oversees assets totaling $3.1 trillion.