According to a report on December 24 by Financial Associated Press (Editor Huang Junzhi), Goldman Sachs' new industry model suggests that as Wall Street's optimism about the USA economy and stock market approaches historical highs, investors should adopt more "defensive measures."

Analysts led by Goldman Sachs' Chief U.S. Equity Strategist David Kostin stated in a recent report that their forecast for U.S. economic growth in 2025 is higher than market consensus, which, along with possible changes in fiscal policy, generally supports a tendency toward cyclical trends, but the market seems to be digesting larger GDP growth.

They added that a suitable example is that since the election day, the returns of cyclical stocks excluding commodities have outperformed defensive stocks by five percentage points.

Therefore, Goldman Sachs pointed out that considering the current stock prices and the extreme optimism about growth that the market has universally reflected, the performance of defensive stocks such as utilities and Medical Care will be particularly prominent.

"The current market pricing indicates that, compared to many cyclical Industries, the risk/return of some defensive sectors such as utilities appears more attractive," the analysts wrote.

Goldman Sachs stated that amid the AI boom, utility stocks are especially expected to rise. As AI datacenters drive up electricity consumption in the USA, this will create unprecedented demand for Electrical Utilities.

A recent estimate from Bernstein Research shows that datacenters require a large amount of electricity to run, and their electricity demand will exceed supply within just two years.

"In addition to its defensive characteristics, the Electrical Utilities sector is also exposed to the AI theme. Utility companies' earnings should benefit from the power demand related to AI, especially for those unregulated utility companies," the report stated.

Besides Goldman Sachs, analysts from UBS Group and JPMorgan have also made similar optimistic forecasts for the Industry, noting the favorable factors of AI and the relatively small impact of tariffs on the Industry due to its strong influence in the USA.

On the other hand, Goldman Sachs analysts also stated that Medical Care stocks should benefit from historically low valuations, with an expected PE of 16 times, while the expected PE for S&P 500 Index constituents is 18 times.

However, analysts also warned that their models did not account for any policy uncertainties that could affect the Industry.

"The main political controversies for the Medical Care Industry in 2025 include Medicaid funding, Pharmaceutical pricing, and the nomination of Robert F. Kennedy Jr. to lead the Department of Health and Human Services. Uncertainties in policy over the next six months will be a significant determinant of Medical Care earnings," the report stated.

In addition to Electrical Utilities and Medical Care stocks, the aforementioned model also recommends increasing Shareholding in cyclical Industries such as materials, Software and services, as well as Real Estate. Here, "increasing Shareholding" is defined as having more than a 50% chance of outperforming Large Cap. Finally, the model believes that Industrial and Technology Hardware stocks have the lowest probability of outperforming Large Cap in the coming months.

As the model provides the above recommendations, the level of bullishness in the market is approaching record highs, and concerns about a recession in the USA are also easing. Wall Street expects that the bull market, which has lasted for two years, will continue into 2025, although at a slower pace.$S&P 500 Index (.SPX.US)$After several years of ROI exceeding 20%, Analysts expect the average Target Price by the end of 2025 to rise by about 11% from the current level.

Want to enter the market but timing is difficult. "Monthly Payment Zone"The feature helps you to invest regularly and steadily, capturing investment opportunities!

Editor/ping