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The DeepSeek tech sell-off doesn't signal a bear market: Goldman Sachs

Jan 29, 2025 - markets.businessinsider.com
Goldman Sachs has downplayed fears of a bear market following a significant sell-off in stocks, particularly in the tech sector, on Monday. The sell-off was attributed to a revaluation of high tech stock valuations rather than weak fundamentals, spurred by the debut of DeepSeek, an AI app from a Chinese startup. Goldman analysts, led by Peter Oppenheimer, emphasized that strong macroeconomic conditions remain intact, with only a 15% chance of a recession in the next 12 months. They argue that the market correction is not indicative of a sustained bear market, as bear markets typically occur when profits fall due to recession fears.

Despite the market's volatility, Goldman maintains that the tech sector's influence on market returns is due to its strong fundamentals, not speculation. The firm suggests that investors diversify their portfolios without abandoning tech, recommending exposure to bonds, the equal-weight S&P 500, and global growth opportunities outside the tech sector. While some commentators, like Nassim Taleb, warn of potential deeper market pullbacks, Goldman believes the current conditions do not signal a bubble, and tech remains an attractive investment.

Key takeaways:

  • Goldman Sachs believes the recent stock sell-off is a correction, not the start of a bear market, due to strong macroeconomic conditions.
  • The sell-off was driven by a re-evaluation of high valuations in tech stocks, not weak fundamentals, and was influenced by the debut of the AI app DeepSeek.
  • Goldman suggests diversifying investments while maintaining tech exposure, recommending bonds and global growth compounders.
  • Other commentators, like Nassim Taleb, warn that the decline could signal deeper market adjustments.
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