Obesity drugs and generative AI round out Goldman Sachs' 7 biggest market themes to watch in 2024
Thomson Reuters
- Goldman Sachs says obesity drugs, AI, and manufacturing will be major market themes this year.
- Obesity drugs and generative AI emerged in 2023, but were just in their "infancy."
- Strategists shared stock picks for the bank's seven big market themes of 2024.
A handful of trends will be important for markets to watch closely this year, according to Goldman Sachs.
Overall, Goldman notes that the US economy appears to be holding up well after the Federal Reserve's interest-rate hikes, and markets outperformed expectations by a sizable margin in 2023.
Strategists at the bank say they largely expect that to continue in 2024.
"The coast does look clear for the US economy," the bank's strategists said Tuesday. They nodded to lower Treasury yields, an impending Fed pivot toward easier monetary policy, and above-consensus GDP growth expectations.
Looking ahead to the rest of the year, Goldman is eyeing seven big themes that could shape markets.
Here's a look at the key market trends the Wall Street giant is seeing for the coming 12 months, from artificial intelligence to obesity drugs to green energy.
1. Generative AI
The bank expects AI technology and innovation will ultimately increase productivity and lead to a boost of 0.4% to annual GDP growth.
"AI is likely to be a big boom to the companies that can provide the compute power and platforms to support AI initiatives," the strategists said.
Stocks the bank recommends with exposure to this theme, according to Goldman Sachs, include Amazon and Nvidia.
2. Green energy spending
"The need for the world to respond to climate change is becoming increasingly clear and corporations are responding to the opportunity that is emerging as governments incentivize a wave of new development to help transition from fossil fuels to renewable energy sources," Goldman Sachs strategists wrote in the note.
Companies in the solar sector, those that can harness methane gas from garbage, and names in nuclear energy could be poised to benefit from the trend.
Strategists named First Solar, Republic Services, and Southern Company as stocks to watch in the space.
3. Private credit
Investors will look to private debt deals to beat public market returns, and private credit retail products offered by asset managers have gained traction over the last year, Goldman Sachs said.
Strategists noted that "insurance companies are increasingly allocating capital to private markets creating a reliable and big source of funding for this market."
For this theme, the bank says Blue Owl Capital shares could stand to benefit.
4. "The echo-boom of the post-pandemic era"
This theme could be on its final legs as the world adjusts to the new normal of the post-pandemic years.
Various sectors such as transportation and travel are still adjusting after the multi-year anomaly of the COVID-19 era, but the strategists said two notable sectors include financials and technology, which are coming off the regional bank crisis in 2023 and the tech bubble bursting in 2021, respectively.
"[H]eading into 2024, the tone does appear to be changing," strategists said.
Hiring appears to be ramping up in software firms in particular, which is frequently followed by a growth acceleration, they added.
Stocks with exposure to this theme include Amazon, OKTA, JB Hunt, Textron, JPMorgan, and Jefferies Financial Group.
5. Obesity drugs
The stock market got Ozempic'd in 2023, and the craze over weight-loss drugs will be a theme to keep watching this year, the bank says.
Eli Lily gained nearly 60% last year on the popularity of its weight-loss drug. It became the 9th largest company by market cap in the S&P 500, and it's been hailed as one of the key winners of the year.
In 2024, similar drugs will come to market from competitors looking to address a range of issues beyond obesity, Goldman Sachs said, but the strategists expect demand for GLP-1 drugs to remain a key trend to watch.
6. A manufacturing renaissance
Climate change, post-pandemic ripple effects, and deglobalization will all contribute to a manufacturing renaissance in the US, according to Goldman.
New projects are set to come online this year, and Goldman estimates that US industrial trends across semiconductors, EVs, and charging stations could drive as much as $600 billion in incremental capex by 2030.
Stocks with exposure to the theme include Nvidia, Cintas, TE Connectivity, First Solar, JB Hunt, Parker-Hannifin, and PPG Industries.
7. More mature internet growth and blurring business models
Finally, Goldman Sachs said growth for internet companies is maturing compared to a decade ago. Growth is slowing and this is pushing firms to explore new areas and sub-sectors to keep expanding.
That's driving "an exploration that is resulting in the blurring of operating lines between advertising and commerce, consumption habits and aggregated consumer behavior within scaled ecosystems," the strategists said.
Amazon is among the firms positioned to thrive in this landscape, Goldman said, while WW International and Constellation Brands also have exposure to the theme.
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