In The Lead 2024: The Evolving Economic and Investing Environment
November 12 - 14, 2024
Goldman Sachs hosted a community of dynamic women for its In the Lead event in Palm Beach, Florida. Over the course of two days, attendees engaged with speakers, peers, and Goldman Sachs executives on timely topics. Below are several key takeaways from the event. For more perspectives from our In the Lead event, read Maximize Wealth Planning and Leadership Opportunities.
Navigate the Current Landscape
The post-election landscape in the US
Alec Phillips, chief US political economist, US Economics Group, Global Investment Research, Goldman Sachs
One week after the US election, the landscape was taking shape as president-elect Donald Trump began selecting his cabinet. Early indicators highlighted two key areas of focus: tax policy and tariffs. Alec Phillips shared his thoughts as the transition begins.
Phillips thought a significant overhaul of the US tax system is unlikely, though some changes may be on the horizon. “We'll probably see a little bit of an expansion of the state and local tax deduction, but not a big one,” Phillips said.
The US budget deficit is likely to be between 6%-7% of GDP — much higher than 2017, Phillips noted. Trump’s campaign plans might cost another $4-$5 trillion over 10 years (about 1% of GDP), unless other spending cuts or revenue increases are made. “The big question for Congress over the coming year will be how do they address some of the things laid out without adding to the deficit and digging the hole deeper,” said Philips.
Trade policy, particularly tariffs, was also top of mind. The Biden administration left the process for tariffs on Chinese imports intact from Trump’s first term, which could allow the new administration to act swiftly to increase tariffs on imports. “They can sort of just turn the tariff machine on again and keep going,” said Phillips. “The question is just how much.” While the current rhetoric calls for big hikes, similar rhetoric in Trump’s first term resulted in smaller tariff increases.
However, the broader question remains whether Trump will pursue across-the-board tariffs or limit increases to specific products. According to Phillips, it’s possible to “end up with some kind of middle ground position where you see tariffs on a variety of goods from different countries, but not necessarily something that's truly across the board.”
The investment outlook: Stay invested in US equities
Sharmin Mossavar-Rahmani, head, Investment Strategy Group and chief investment officer, Wealth Management, Goldman Sachs
Since the trough of the global financial crisis in March 2009, the Investment Strategy Group (ISG) has held two key investment themes which have served clients well: US preeminence and staying invested. Sharmin Mossavar-Rahmani maintains these investment themes remain intact.
There are several factors that underpin ISG’s view of US preeminence, including: the largest economy in the world; large and deep financial markets; favorable demographics; persistent corporate earnings growth; an immense wealth of resources; and resilience. These factors are set to persist.
The diversity and growth of the US economy has driven a strong upward trend of US corporate earnings, with US earnings growth continuing to outpace other regions. “The trajectory of earnings in the US, if you look at this and compare it to earnings in other parts of the world, you don't see anything like this steady growth,” said Mossavar-Rahmani. Given the strong upward trend of corporate earnings — and of equity prices that follow earnings — the hurdle to underweight US equities is very high.
While acknowledging that US stocks are expensive, Mossavar-Rahmani explained that history teaches us high valuations alone are not a good reason to underweight stocks. Past periods with elevated US equity valuations have still seen substantial subsequent returns. This highlights the penalty for exiting equities prematurely. "You don't want to be out of the market because if you miss a handful of days, you lose so much return," said Mossavar-Rahmani. “If you just literally missed 25 days of the best days that we've had since, let's say, World War II, your equity returns are substantially reduced.” Moreover, Mossavar-Rahmani reassured that historically, high equity concentration of top stocks in the S&P 500 has had no bearing on one-year forward returns. “So, people worrying about concentration…is actually not relevant.”
Perspectives from Goldman Sachs Chairman and CEO David Solomon
David Solomon, chairman and chief executive officer, Goldman Sachs; moderated by Meena Flynn, co-head, Global Private Wealth Management, Goldman Sachs
Meena Flynn sat down with David Solomon to discuss how he’s navigating the firm through a complex global environment. In addition to Solomon’s focus on identifying growth opportunities and strategically allocating resources to enhance the firm’s business, he highlighted his primary role as “a risk manager.” Solomon noted, “We have a $1.7 trillion balance sheet. I'm worried about things that can go wrong, and I'm trying to think about the distribution of outcomes and to protect [the firm against them].”
Solomon spoke about the potential for growth in capital markets, projecting stronger M&A and public market capital formation in 2025. “Given the macro setup, my guess is we're going to run ahead of 10-year averages,” he said. “If you look at the backlog and all the things we can see in our ecosystem, a lot of that pent up demand is kind of getting pulled forward relatively quickly.”
Solomon also talked about the potential recession risk moving forward, after what has been a “long time” without one. “The government side of the economy has been much more pronounced and much stronger for an extended period of time,” said Solomon. “If we go to a more market-driven or private investment, more government-constrained economic model, you're going to be more susceptible to speed bumps or recessions, because that can change much more quickly than the government.”
On the whole, Solomon is “hugely optimistic” about the trajectory of the future, particularly the transformative potential of “the productivity gains we’re going to get because of accelerations in technology, medical technology, health, disease, and our abilities to elongate life.”
Accessing Evolving Opportunities and Trends
Expanding opportunities in alternatives investing for individuals
Sara Naison-Tarajano, global head, Private Wealth Management Capital Markets and Goldman Sachs Apex, Goldman Sachs
Kristin Olson, global head, Alternative Capital Markets Group, Goldman Sachs
The ever-crowding investment landscape has pushed many individuals, especially those with family office capital, to find new spaces to invest. “The menu of choices and opportunities you have to get into the best managers have probably never been better,” Kristin Olson said.
The deal-making environment over the past couple of years has led more companies to stay private for longer. 87% of companies with revenue of $100 million or more are still private in 20241. This has created an opportunity in secondary private equity as companies look for sources of liquidity outside of the public markets. “If you really want to access the broader growth of the economy, you really need to be investing in private markets,” said Olson. Sara Naison-Tarajano predicted 2025 would see an opening up of IPO activity.
Naison-Tarajano is already seeing a shift. “One of the really interesting things we’ve seen in our family office portfolios is much higher allocations to alternatives,” she said.
“If you look at the next 10, 20, 30 years, the fastest-growing segment that’s going to allocate to alternatives will be individual investors,” predicted Olson. When investing in alternatives, both Olson and Naison-Tarajano agree on the importance of staying invested. “Over a cycle, the market will come back,” said Naison-Tarajano. “One of the advantages that private clients and family offices have is you can run in when everyone else is running away.”
Investing in untapped markets
Cathy Engelbert, commissioner, WNBA; Carli Sapir, founding partner, Amboy Street Ventures; Whitney Casey, co-founder, Tally Health; investor, L Catterton; Kristin Olson, global head, Alternative Capital Markets Group, Goldman Sachs
In a constantly shifting landscape, investors are also looking for new opportunities and untapped markets.
Women’s health is one such quickly growing industry. Carli Sapir believes it is “an incredible time to be investing in early-stage women's health companies because it's not crowded.” A majority of investors are not necessarily looking to women’s health as potential venture, which means there is not a lot of competition in the space.
Entrepreneurs are working to fill the gaps in this emerging industry. Sapir’s firm is the first venture capital fund dedicated to women’s health and sexual well-being. Others, like Tally Health, are focused on the science of aging. Whitney Casey shared some of her top wellness tips for longevity.
Similarly, women’s sports are of increasing interest to investors. In 2024, the WNBA in particular saw record viewership (54 million unique viewers during the regular season), an attendance jump of ~50%, and league revenue quadrupling over the last three years — with the outlook for the future bolstered by a breakout class of rookie players and a new media deal beginning in 20262.
“Sports is big business. This is an asset class,” said Cathy Engelbert.
As sports leagues have loosened restrictions on sports franchises, allowing institutional ownership, a whole new avenue for sports investment is opening. “There are a lot of dynamics making it a very interesting time to invest in sports,” said Kristin Olson.
For investors, the clear advantage of investing early is the potential to realize outsized returns compared to similar investments in mature men’s teams, assuming revenues continue growing to support valuations.
For more on investing in women’s sports, read our report: A New Era Dawns in Women’s Sports.
The impact of AI
George Lee, co-head, Goldman Sachs Global Institute; Dan Keyserling, managing director, Goldman Sachs Global Institute, Sara Africk, head, Private Wealth Management Digital Transformation, Goldman Sachs, Kristin Olson, global head, Alternative Capital Markets Group, Goldman Sachs
“It's very early days of this technology and these capabilities are truly emerging,” said Sara Africk. Without a good strategy around AI, companies could very well find themselves falling behind the ever-moving curve. George Lee put the trajectory of AI into perspective. “New technology is moving faster and getting better at a rate I’ve never experienced in my 40 years around technology.”
Dan Keyserling predicted that AI is “going to confer a lot of power on individuals and economies that emerge successfully and harness this technology.” He voiced concerns about how the scarcity of the resources needed to power AI innovation would spark fierce competition, potentially leading to concentrations of power and rivalries.
Keyserling likened the current AI landscape to “a gold rush and an arms race at the same time.” Now more than ever, companies will need the best technology — and the best talent — to ensure they remain competitive.
Kristin Olson cautioned investors to think about “how AI could either hurt or help a business, even traditional old-line businesses.” The way companies react to and implement AI could strongly impact growth and competitiveness.
For more perspectives from In the Lead, read Maximize Wealth Planning and Leadership Opportunities.
1 https://www.apolloacademy.com/many-more-private-firms-in-the-us/
Investment Strategy Group (“ISG”). The Investment Strategy Group, part of the Asset & Wealth Management business (“AWM”) of GS, focuses on asset allocation strategy formation and market analysis for GS Wealth Management. Any information that references ISG, including their model portfolios, represents the views of ISG, is not financial research and is not a product of GS Global Investment Research and may vary significantly from views expressed by individual portfolio management teams within AWM, or other groups at GS.
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