Goldman Sachs director Greg Tuorto thinks market conditions look healthy for small-cap stocks.
In a new interviewTuorto notes that small caps have had a rough three to four years since the U.S. Federal Reserve started raising rates, and have yet to see the expected tailwinds since the Fed started cutting rates.
“We’re starting to see a nice earnings cycle in small caps. We think it’s going to be a lot stronger than the large cap earnings cycle. We also think they’re a lot cheaper. About 25 to 30 percent cheaper than large caps. Plus, you have the options in the IPO market, which should help. And M&A is starting to pick up, which is also really nice, you know, for the small cap market.”
In the small-cap space, Tuorto argues that the picks and shovels side of AI is a smart way to secure profits over a longer timeline.
“I think you’re looking at semiconductors. Semiconductor cap equipment, which didn’t exist anywhere two years ago and is now a leading sector in the market. And some of this optical connectivity that’s going to connect these data centers together. You know, there’s a lot of opportunity here. There’s a lot of ways to play with it. There’s a lot of different types of things to invest in. So I think this could be good even if software doesn’t join the party, as it hasn’t in the last, say, three, six months. has been.”
The Goldman Sachs executive also says investors should look at the biotech and defense sectors.
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