Equity risks and alts opportunities

After dropping steeply amid recession fears, US stocks are just about where they were heading into the April 2, so called Liberation Day, when president Trump first announced surprisingly high tariffs on America's trading partners. So what could be ahead, and how should investors position their portfolios now? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Today, I'm joined again by David Costin, our chief US equity strategist in Goldman Sachs Research, and by Patty Raphael, global co head of the third party wealth management business in Goldman Sachs Asset Management. They both recen

for inviting us.

Super delighted to be here. Thanks, Allison. So,

David, stocks are still down year to date, but as I just said, they are now back to pre Liberation Day levels.

Way I would characterize the performance of the equity market in the last month has been the great concern that shocked the market when the president announced the tariffs in the so called Liberation Day. And the market quickly pivoted to the idea there's a really dire outcome, and the prospects of recession were quite elevated as a result. And the surprise that happened a week later on the April 9 when the president delayed for about ninety days the tariffs gave a lot of portfolio managers the confidence that the off ramp was there and that, ultimately, the tariffs that had been discussed on

we've also had first quarter earnings, which generally are coming out pretty strong. And

first quarter earnings have been better than expected coming into the first quarter reporting season. Expectation was plus 6% year over year growth, and it's coming in closer to plus 12. So a pretty substantial beat, larger beats than we've seen in the last three years. Last twelve quarters or so, usually been around four percentage points. So, obviously, here we had six percentage points, positive surprise. And that's also given investors some confidence that the idea of the economic growth can continue. However, remind you, that was the results in the first quarter, which went through March

wanna get back to that valuation point. But so as we've just been discussing, I mean, there are tariffs that have been implemented, but the bulk of some of these tariffs have not been implemented given the pause, but there's still a lot of tariffs that have been implemented. So what do you expect to see from second quarter earnings? Could you begin to see a bigger impact? Is that what you are expecting?

So the debate right now with management is who is going to pay the increased tariffs? Is that going to be passed through to the end customers, or is that going to be absorbed by the company itself, or is there gonna be pushback on the supplier? And is the supplier going to have to bear some of that burden? And that's a reasonable debate. It will depend on the different industry groups, different nature of the product cycle. There's certainly greater risks in the second quarter results, both from a revenue point of view in terms of actually the demand and how consumer behavior has has been and