Goldman names global growth stocks set to make a comeback
European growth stocks haven’t been doing as well as their U.S. peers this year. Growth stocks in the region have underperformed value stocks by 13% since the start of the rate-hiking cycle in 2022, according to Goldman Sachs in a Nov. 20 report. But the investment bank expects that to change soon. Macroeconomic conditions in 2024 will lead to a more balanced performance between growth and value stocks, it said. Bond yields appear to have peaked — a positive for growth stocks — and economic growth should speed up in the first quarter of next year — a positive for value stocks. Higher interest rates are typically not good for growth stocks. However, Goldman said earnings growth “should become scarce, meaning that investors will likely favour companies outgrowing the market.” Tech, companies from the digital economy and luxury are expected to grow “considerably faster” than the rest of the market, said the Wall Street bank. But their historical volatility is higher than that of “resilient growth” areas such as consumer staples, it said. However, even if bond yields stop rising, around 30% of the companies in the Stoxx Europe 600 will have to refinance their debt at a yield more than two times higher than their existing coupon rate — and they would need to do so within the next two years. “We believe that investors will likely favour companies with lower leverage and strong balance sheets,” Goldman wrote. The bank recommends an overweight rating for pure growth companies, namely those in its growth basket. Goldman said “pure growth” companies are more cyclical than quality stocks or stocks with stable margins. These are some stocks in Goldman’s basket: — CNBC’s Michael Bloom contributed to this report.
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