Goldman Sachs: Value stocks’ outperformance to continue in 2023

Yahoo Finance's Ines Ferré discusses a Goldman Sachs note on value stocks.

Video Transcript

RACHELLE AKUFFO: Value stocks may be looking at another year ahead of outperforming growth stocks as central banks keep interest rates elevated and with a tech sector under pressure. For more on this, we have Yahoo Finance's Ines Ferré. Hey, Ines.

INES FERRÉ: Hey, Rachelle. And it's worth noting that higher interest rates make future cash flows less valuable, and so we saw in 2022 amid a higher interest rate environment that growth stocks-- big-tech stocks really took a hit. Amid that higher interest rate environment, you've got a slowing economy. You've got margin pressures as well. So this all makes less valuable stocks more in vogue, in favor. So we saw value stocks really in favor in 2022.

Well, that's a trend that's expected to continue, according to Goldman strategists. They see value stocks outperforming again in 2023. Goldman says that growth and tech is still expensive even after falling last year. Remember that tech and other growth stocks, those were the leaders when it came to the worst sell off last year since 2008.

So strategists at Goldman that are led by Peter Oppenheimer, the strategist, said that as big-cap technology sees further margin pressures and commodity prices rise and real interest rates remain higher, we think that it's a trend that's going to continue.

So they're not the only ones that are saying this. A Bank of America note this week said that investors should avoid crowded spaces, including big tech. You also had a note from Morgan Stanley with the strategist Michael Wilson warning about profit margins at tech companies being under pressure.

So what is in favor? Well, this year, financials and energy stocks. Now, can energy stocks really perform their spectacular performance that they had last year this year again? Can they do that again?

Well, I had spoken to strategists about this, and that's in a recent note that I put on Yahoo Finance. Maybe they won't repeat the exact spectacular performance that they had last year, but they are expected to do well again this year, guys.

AKIKO FUJITA: Yeah, it's hard to top 2022 when you think about where energy traded over the last year. We'll continue to watch that. Ines, thanks so much for that.