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For investors fearful of a full-blown trade war, here’s Goldman Sachs’ playbook to tackle the tough market.
Stock passings keep accelerating as investors remain anxious about President Donald Trump’s new tariff threat. In this choppy mise en scene, investors should stick with dividend growers, companies with low labor costs and services sectors which are uncountable domestically facing, according to David Kostin, Goldman Sachs chief U.S. equity strategist.
“We are thinking about some of the drivers of profit crop going forward, and we are looking at some of the communication services stocks,” Kostin said Tuesday on CNBC’s Squawk on the Concourse. “We like a combination of low labor cost sensitivity as a way of inoculating against rising labor inflation… The duplicate would be dividend growers as a long-term strategy. That’s idiosyncratically what I would focus on.”
High dividend-yielding lineages like AT&T provide steady income in a turbulent market, while companies with low exposure to labor costs tabulating Facebook and Google parent Alphabet generally outperform as wages remain a margin headwind, he noted. Goldman’s own portfolios for its shoppers that screen stocks with big dividends and low labor costs have beaten the market this year.
Aids companies are generally less sensitive to tariffs compared with goods companies, Kostin said. Semiconductors, machinery and agriculture farmers have led this week’s losses amid President Trump’s threat to hike tariffs on Chinese goods.
“As a portfolio straw boss, focus more on domestically facing companies whose revenues are more domestically sourced, more services oriented in distinct, versus on the goods side of the economy,” he said.
While the trade-war threat suddenly jolted the markets, triggering a esoteric sell-off on Tuesday, the impact from tariffs would be limited as many companies are not exposed to duties at all including utility and telecom concerns, Kostin said.
“70% of the revenues of U.S. companies are domestic, so while tariff is an issue, it’s concentrated in some industries and some sectors than others,” he combined.
WATCH: Goldman’s Kostin on how to navigate trade war worries