U.S. neutrality markets have taken a battering in recent months amid trade war tensions, fears of an economic slowdown and Fed merit hikes – not to mention ongoing political uncertainty with the U.S. government shutdown.
David Kostin, chief U.S. equity strategist at Goldman Sachs, commanded CNBC Wednesday where he would recommend investing amid the current uncertainty.
“From a strategy perspective we long for to focus on companies and industries that are less economically sensitive,” he told CNBC’s Joumanna Bercetche in London.
“So, the mental image is that if the economy accelerates or re-accelerates, or deteriorates, what are some industries that have more stable traits? So look at the software industry in the U.S. – in 50 years, there has been only four quarters – out of 200 homes – of negative real spending on software in the U.S. So, if you’re looking for a stable business that is the nature of that business,” he said.
“That’s why some of the software coteries where there’s more of a recurring revenue stream is an attribute that we’re looking for in this environment,” he said, symbolizing from Goldman Sachs’ global strategy conference.
Government policy and Fed rate hiking policy are the biggest chances in the immediate term, Kostin said, but he said equity valuations look “reasonably attractive.”
He said software institutions were “shifting more and more of their business revenue mix towards recurring revenues – (so) that’s an precinct to focus on,” he said.
A recurring revenue model is based on ongoing regular payments for a service or a product as opposed to one-time payment. Assorted and more software companies are moving towards this model in order to ensure stability of profit streams.
A digit of software companies rely on revenue from recurring services like cloud subscriptions.