Goldman Sachs Quarterly Commentary

Q2 MARKET REVIEW

  • US equity markets continued to outperform developed market peers in Q2, gaining 4.5% and reaching a new all-time high. These gains remained narrow in scope, however, with the M7 rising 16.9% while the equal-weighted S&P 500 fell by 2.6% and the small-cap Russell 2000 went down 3.3%.
    Internationally, Japanese equities (TOPIX) were up 1.7% and Euro Area equities (SX5E) were down 1.3%, with most of the loss coming in June following the increased uncertainty due to the French and UK snap elections.
    We continued to see positive momentum in risk assets on a year-to-date basis, along with signs of improvement in global manufacturing PMIs, a healthy labor market, strong earnings growth, and expectations of policy easing by major central banks.
  • Q2 also saw a return to the disinflationary trend in the US with lower core PCE, lower GDP, and a slowdown in private consumption. Moderation in job openings has also been an encouraging sign of labor market rebalancing. Job openings remained on a downward trend with a latest reading of 4.9% versus the post pandemic peak of 7.4%. The resiliency of the labor market remains a headwind to the FOMC’s effort to achieve its 2% inflation target.
  • Among the US sectors, technology (XLK) outperformed as it rallied 8.8%, followed by utilities (XLU), which was up 4.6%. On the other hand, materials (XLB), industrials (XLI), and energy (XLE) underperformed noticeably with selloffs of 4.5%, 2.9%, and 2.7% respectively.
  • Commodities had a mixed quarter with oil (WTI) down 2%, however metals had a strong performance. Copper, gold, and silver were up 10%, 5.5%, and 17% respectively. Overall, commodities have delivered strong returns in the first half of 2024 with oil (WTI) up 15% and copper up 13% respectively. Gold and silver have rallied 13% and 22% respectively in the first half of the year.

PERFORMANCE REVIEW

Q2 performance was positive across risk profiles, with equities contributing strongly to outperformance versus the benchmark, driven mostly by domestic large cap equities. All risk profiles outperformed their benchmarks mostly due to a bias towards US equities.

 
US EQUITIES
Within our broader asset allocation, we continue to favor US equities over developed international and emerging markets. Over the quarter, US growth momentum has remained robust with equity markets reaching all-time highs aided by improvement in global manufacturing, a healthy labor market, and healthy earnings growth. Additionally, expectations of policy easing continued to support momentum in risk assets.

Resilient macroeconomic data and earnings growth continue to provide a constructive backdrop for US equities and a soft-landing narrative. We maintained our overweight to US large cap and international developed equities from Q1, which helped to drive performance. Our underweight in small cap exposure also helped avoid further drawdown as returns remained concentrated in the largest names, especially the Magnificent 7. Both our ActiveBeta and MarketBeta US Equity exposures were the largest contributors to positive total portfolio returns and continue to offer attractive diversification across equity styles.

International Equities 
Developed international equities were a detractor from portfolio performance in Q2. Emerging market returns outpaced developed market returns. In the UK, the Bank of England leaned dovish, with the market interpreting the possibility of an easing cycle beginning in the second half of the year. However, geopolitical concerns and increased uncertainty in Europe led to underperformance of European assets versus their peers. 
Fixed Income
Fixed income performance was relatively flat for the quarter. Our increased exposure to IG slightly detracted, while our increased exposure to HY was additive to performance. Meanwhile, positions in inflation protected securities and mortgage-backed securities helped to offset drawdown from long term treasuries. Recent activity and labor market rebalancing in addition to continued expectations of disinflation help maintain a soft-landing narrative. Overall, rates continue to look moderately attractive with a potential start of the Fed easing cycle in the second half of the year.
MACRO OUTLOOK
  • The probability of a soft landing in the US remains our base case scenario. Despite uncertainties from geopolitical tensions and the upcoming US election, our outlook for US equities remains constructive given resilient activity data, strong earnings, and expectations for lower rates. 
  • The timing and magnitude of further policy rate calibration becomes very crucial as easing too soon could reignite inflationary pressures and waiting too long could break the labor market. A further slowdown in consumption and job growth could be worrying for policy makers and market participants, renewing fears of a recession. As a result, we believe the Fed will become more balanced between its dual mandate of inflation and full employment compared to a year ago when the FOMC was squarely focused on inflation. 
  • US growth is expected to moderate from its recent strong pace but remain healthy, supported by resilient domestic demand. While the Fed has yet to begin the easing cycle, we expect rate cuts to commence later this year as recent data suggests the labor market is softening and progress is being made in bringing inflation down. In the short term, we expect to see continued divergence between the Fed and the ECB, which partially factors into our constructive view on global developed market equities outside of the US. 
  • Within US equities, we expect earnings growth convergence between mega-cap tech stocks and the broader market over the next 3-4 quarters, leading to increased breadth in market performance. 
  • In Europe, we see an improving growth/inflation mix supported by the ECB’s decision to cut rates by 25 bps in June despite a moderate increase in the projected core inflation path. The move was motivated by the reduction in upside inflation risks which warrants a modest decline in the degree of restriction. Going forward the ECB will remain in data dependent mode. The most plausible scenario is quarterly rate cuts for the remainder of the year. 
  • We see opportunity in Japan as it is in an earlier stage of the business cycle relative to other markets. We expect consumption to improve due to better real wage growth allowing the Bank of Japan to begin modest rate hikes while remaining accommodative to growth. 
  • In China, after better-than-expected growth in the first months of the year, growth momentum has softened. The main short-term growth headwinds come from the real estate crisis and low consumer confidence while the main medium-term growth risk continues to come from low business confidence stemming from state interventionism and regulatory uncertainty.

DISCLOSURES

Multi-Asset Solutions, as of June 30, 2024. Past performance does not guarantee future results, which may vary. There is no guarantee that these objectives will be met. The economic and market forecasts presented herein are for informational purposes as of the date of this presentation. There can be no assurance that the forecasts will be achieved. Any mention of an investment decision is intended only to illustrate our investment approach and/or strategy and is not indicative of the performance of our strategy as a whole. It should not be assumed that any investment decisions shown will prove to be profitable, or that any investment decisions made in the future will be profitable or will equal the performance of the investments discussed herein. Diversification does not protect an investor from market risk and does not ensure a profit. The investment manager may change the allocations over time. Allocations may not be representative of current or future investments. Goldman Sachs does not provide accounting, tax or legal advice. Please see additional disclosures at the end of this presentation.

 
Certain Risk Considerations 
Equity investments are subject to market risk, which means that the value of the securities in which it invests may go up or down in response to the prospects of individual companies, particular sectors and/or general economic conditions. Different investment styles (e.g., “growth” and “value”) tend to shift in and out of favor, and, at times, the strategy may underperform other strategies that invest in similar asset classes. The market capitalization of a company may also involve greater risks (e.g. “small” or “mid” cap companies) than those associated with larger, more established companies and may be subject to more abrupt or erratic price movements, in addition to lower liquidity. The risks of a Model will be based on the risks of the various Portfolio Funds represented in the Model, which risks are described in the applicable Portfolio Funds’ prospectuses. All potential investors should carefully review a Portfolio Fund’s prospectus for more complete details on the Portfolio Fund’s specific goals, risks, charges and expenses before investing. Risks associated with the Models include: Investments in fixed income securities are subject to the risks associated with debt securities generally, including credit, liquidity, interest rate, prepayment and extension risk. Bond prices fluctuate inversely to changes in interest rates. Therefore, a general rise in interest rates can result in the decline in the bond’s price. The value of securities with variable and floating interest rates are generally less sensitive to interest rate changes than securities with fixed interest rates. Variable and floating rate securities may decline in value if interest rates do not move as expected. Conversely, variable and floating rate securities will not generally rise in value if market interest rates decline. Credit risk is the risk that an issuer will default on payments of interest and principal. Credit risk is higher when investing in high yield bonds, also known as junk bonds. Prepayment risk is the risk that the issuer of a security may pay off principal more quickly than originally anticipated. Extension risk is the risk that the issuer of a security may pay off principal more slowly than originally anticipated. All fixed income investments may be worth less than their original cost upon redemption or maturity. Investments in foreign securities entail special risks such as currency, political, economic, and market risks. Risks are heightened in emerging markets. Diversification does not protect an investor from market risk and does not ensure a profit. Exchange-Traded Funds are subject to risks similar to those of stocks. Investment returns may fluctuate and are subject to market volatility, so that an investor’s shares, when redeemed, or sold, may be worth more or less than their original cost. ETFs may yield investment results that, before expenses, generally correspond to the price and yield of a particular index. There is no assurance that the price and yield performance of the index can be fully matched. Please see GSAMFUNDS. com/ETFs for additional risk considerations. Mutual funds are subject to various risks, as described fully in each Fund’s prospectus. There can be no assurance that the Funds will achieve their investment objectives. The Funds may be subject to style risk, which is the risk that the particular investing style of the Fund (i.e., growth or value) may be out of favor in the marketplace for various periods of time. 
 
Description of Model Provider 
Goldman Sachs Asset Management, L.P. (“GSAM” or “Model Provider”) is part of a worldwide, full-service investment banking, broker-dealer, asset management and financial services organization. As such, Model Provider and its affiliates and their respective directors, partners, trustees, managers, members, officers and employees (collectively, “Related Persons”) generally have multiple advisory, transactional and financial and other interests in securities, instruments, companies and other assets that may be recommended to be purchased, sold or held in registered investment funds, including, but not limited to, exchange-traded funds and mutual funds (“Portfolio Funds”) composing the model portfolios (“Models”). Additional information about conflicts of interest of Model Provider and its Related Persons is set forth in the Model Provider’s Form ADV, which should be reviewed prior to using Models. A copy of Part 1A and Part 2A of Model Provider’s Form ADV is available on the SEC’s website (adviserinfo.sec.gov). Additional conflicts of interest and risks with respect of each Portfolio Fund are set forth in the offering documents in respect of such Portfolio Funds, which are generally publicly available on the internet. Models are maintained by GSAM’s Multi-Asset Solutions (MAS) team. While the name of the team has changed over the course of the past several years, any historical references to this group of investment professionals who offer this service at GSAM is presented under the name of Multi-Asset Solutions. Model Provider and its Related Persons give advice, make recommendations and take action in the performance of their duties to clients, or for their own accounts, that may differ from decisions, or in the timing and nature of action taken, with respect to the Models or the composition thereof. Subject to applicable law, nothing restricts Model Provider or its affiliates or any of their personnel, from buying, selling or trading in any securities, including any Portfolio Funds, instruments or companies for themselves or any clients. Model Provider and its Related Persons will have no obligation to include in a Model any Portfolio Fund or any security, instrument or company that Model
Provider or its Related Persons may purchase or sell (or recommend for purchase or sale) for the account of any other client, or for its or their own accounts. Model Provider and its Related Persons make the Models and constituent and related information available to other persons, including Related Persons of Model Provider. Investments made pursuant to the Model allocations in Portfolio Funds involve substantial risks and conflicts of interest and could result in the loss of all or a substantial portion of the assets invested pursuant to the Model allocations. Model Provider has no duty to supervise or monitor the services provided by any sponsor or platform that provides models (a “Platform”), or any person subscribing to receive the Models from the Platform (each, an “Advisor”).
 
Proprietary Model Portfolios 
When selecting Portfolio Funds for inclusion in a Propriety Model Portfolio, GSAM generally expects to select Portfolio Funds sponsored by GSAM or any of its affiliates (any such Portfolio Fund, a “GS Portfolio Fund”) without considering or canvassing the universe of Portfolio Funds sponsored by persons not affiliated with GSAM or any of its affiliates (“Third Party Portfolio Funds”), even though there may (or may not) be one or more Third Party Portfolio Funds that may be more appropriate for inclusion in such Model Portfolio (including available Third Party Portfolio Funds in the applicable asset classes / sub-asset classes that may have lower fees and expenses or other favorable terms relative to a GS Portfolio Fund), unless GSAM determines, in its sole discretion, that a GS Portfolio Fund is not available in the relevant asset class / sub-asset class. To the extent that an appropriate GS Portfolio Fund is not available, only then will GSAM consider Third Party Portfolio Funds for inclusion in a Model Portfolio. Any Third Party Portfolio Funds used in the Model Portfolios shall be selected by GSAM, in its sole discretion. 
 
Required Expertise and Responsibility of Advisers 
Access to Models is available to the Advisor on the condition that it (i) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (ii) will exercise independent judgment in evaluating any information, recommendations or advice provided in the Models; (iii) will interpose its own best judgment in making investment decisions or investment recommendations to its clients and will not rely on any Model as the sole or primary basis for any Advisors investment decisions or investment recommendations; and (iv) is registered as an investment adviser or has been advised by qualified legal counsel that they are exempt from such registration. To the extent the Advisor makes an investment decision or recommendation involving a Model to a client or prospective client, the Advisor must not state, imply or attribute any such investment decision or recommendation to GSAM or that GSAM has made or endorsed any such investment decision or recommendation by the Advisor or otherwise has any relationship or obligations to any of the Advisor’s clients. No information provided through the Models will supplant the obligation of the Advisor to interpose its own best judgment in making investment decisions or investment recommendations to its clients. As between GSAM and the Advisor, before making an investment decision or recommendation regarding a security or investment, the Advisor must have a reasonable basis for any such decision or recommendation without having relied on information from the Model and take into account the client’s circumstances, objectives and risk tolerance to ensure the security or other investment is suitable for the client. The Models are subject to additional terms, conditions and disclosures that are printed on or accompany the Models and their related information. Past performance does not guarantee future results, which may vary. The value of investments and the income derived from investments will fluctuate and can go down as well as up. A loss of principal may occur. This information discusses general market activity, industry or sector trends, or other broad-based economic, market or political conditions and should not be construed as research or investment advice. This material has been prepared by GSAM and is not financial research nor a product of Goldman Sachs Global Investment Research (GIR). It was not prepared in compliance with applicable provisions of law designed to promote the independence of financial analysis and is not subject to a prohibition on trading following the distribution of financial research. The views and opinions expressed may differ from those of Goldman Sachs Global Investment Research or other departments or divisions of Goldman Sachs and its affiliates. Investors are urged to consult with their financial advisors before buying or selling any securities. This information may not be current and GSAM has no obligation to provide any updates or changes. Economic and market forecasts presented herein reflect a series of assumptions and judgments as of the date of this presentation and are subject to change without notice. These forecasts do not take into account the specific investment objectives, restrictions, tax and financial situation or other needs of any specific client. Actual data will vary and may not be reflected here. These forecasts are subject to high levels of uncertainty that may affect actual performance. Accordingly, these forecasts should be viewed as merely representative of a broad range of possible outcomes. These forecasts are estimated, based on assumptions, and are subject to significant revision and may change materially as economic and market conditions change. Goldman Sachs has no obligation to provide updates or changes to these forecasts. Case studies and examples are for illustrative purposes only. References to indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only and do not imply that the portfolio will achieve similar results. The index composition may not reflect the manner in which a portfolio is constructed. While an adviser seeks to design a portfolio which reflects appropriate risk and return features, portfolio characteristics may deviate from those of the benchmark.
 
Other Important Disclosures 
Although certain information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, completeness or fairness. We have relied upon and assumed without independent verification, the accuracy and completeness of all information available from public sources. Goldman Sachs does not provide legal, tax or accounting advice, unless explicitly agreed between you and Goldman Sachs (generally through certain services offered only to clients of Private Wealth Management). Any statement contained in this document concerning U.S. tax matters is not intended or written to be used and cannot be used for the purpose of avoiding penalties imposed on the relevant taxpayer. Notwithstanding anything in this document to the contrary, and except as required to enable compliance with applicable securities law, you may disclose to any person the US federal and state income tax treatment and tax structure of the transaction and all materials of any kind (including tax opinions and other tax analyses) that are provided to you relating to such tax treatment and tax structure, without Goldman Sachs imposing any limitation of any kind. Investors should be aware that a determination of the tax consequences to them should take into account their specific circumstances and that the tax law is subject to change in the future or retroactively and investors are strongly urged to consult with their own tax advisor regarding any potential strategy, investment or transaction. Views and opinions expressed are for informational purposes only and do not constitute a recommendation to buy, sell, or hold any security. Views and opinions are current as of the date of this document and may be subject to change, they should not be construed as investment advice. We undertake no obligation to update or revise publicly any statements, whether as a result of new information, future events or otherwise, except as required by law. Confidentiality No part of this material may, without GSAM’s prior written consent, be (i) copied, photocopied or duplicated in any form, by any means, or (ii) distributed to any person that is not an employee, officer, director, or authorized agent of the recipient.

CONFIDENTIALITY NOTICE: This email may contain privileged or confidential information and is for the sole use of the intended recipient(s). Any unauthorized use or disclosure of this communication is prohibited. If you believe that you have received this email in error, please notify the sender immediately and delete it from your system.

NO OFFER OR SOLICITATION: The contents of this electronic mail message: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, and (ii) may not be relied upon in making an investment decision related to any investment offering Axxcess Wealth Management, LLC, an SEC Registered Investment Advisor. Axxcess does not warrant the accuracy or completeness of the information contained herein. Opinions are our current opinions and are subject to change without notice. Prices, quotes, rates are subject to change without notice. Generally, investments are NOT FDIC INSURED, NOT BANK GUARANTEED and MAY LOSE VALUE.

This message may contain certain statements that may be deemed forward looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.

AWM often communicates with its clients and prospective clients through electronic mail (“email”), short message service (“SMS”), and other electronic means. Your privacy and security are very important to us. AWM makes every effort to ensure that electronic communications do not contain sensitive information. We remind our clients and others not to send AWM private information over email. If you have sensitive data to deliver, we can provide secure means for such delivery.

 

Please note: AWM does not accept trading or money movement instructions via email.

 

All emails and business-related SMS communications are sent through systems that can be archived and monitored. Please contact us at www.axxcesswealth.com for our approved texting number. As a registered investment advisor, AWM emails and SMS communications may be subject to inspection by the Chief Compliance Officer (“CCO”) of AWM or the securities regulators.

 

If you have received an email from AWM in error, we ask that you contact the sender and destroy the email and its contents.

 

If you have any questions regarding our email policies, please Contact Us.