Winners of inflation investment cycle
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Goldman Sachs believes we are in a new “postmodern”, investment cycle. Here’s what the bank thinks is in store — and the stocks investors should own to cash in. The emerging cycle — post the Covid pandemic — is likely to be driven by different economic conditions and priorities, leading to new investment opportunities, the bank said. “We’re entering a new postmodern cycle, in which inflation presents a higher risk than deflation. Goldman’s strategists under Peter Oppenheimer stated that on May 9th, we will see more regionalization, greater prices for commodities and labor, as well as larger and more active governments. Oppenheimer stated that higher inflation will reflect this. Oppenheimer noted that government spending is likely to increase. However, growing pressures from the ESG (environmental, social, and governance) and geopolitical factors are expected to lead towards increased regionalization as well as on-shoreing. What stock selections should you make? Oppenheimer believes the focus will shift to companies that are “adaptors,” and can easily adjust their business models, as well as “enablers” and “innovators” — which can boost efficiency by reducing energy and labor costs. Companies that receive higher government spending or increased capex spend are also liked by the bank. Oppenheimer stated that many of the most sensitive companies have seen their ratings drop in recent months. They offer attractive growth prospects and reasonable value. Goldman includes the following stocks in its “global CAPEX beneficiary” list: mining giants Rio Tinto and Glencore, U.S. defense contractor Raytheon and logistic giant UPS. Adobe, Advanced Micro Devices (Micron) and many other technology stocks were also on the list. Goldman advised investors that they should look for companies with stable and high margins. According to Goldman, utilities, energy and consumer goods were among those sectors that had the best historical 5-year margins. All of these are included in Goldman’s “highly and stable margins” basket. Goldman Fund Manager reveals massive opportunity in technology, and says investors are missing two stocks Wall Street had one its busiest weeks for years. What went wrong and what’s next? The screen featured luxury products companies Hermes, Moncler, and tobacco companies Philip Morris, British American Tobacco, and Moncler. Diamondback Energy and Australia’s leading oil and natural gas company Woodside Petroleum made the list. Coloplast, a Danish manufacturer of medical equipment and healthcare stock Novo Nordisk also appeared on the list. Three utility stocks — one of the best performing sectors this year — were included in Goldman’s basket. The three utilities included in Goldman’s basket are Canada’s Fortis, American Water Works and Power Grid India. Goldman predicted that the new investment cycle would see lower returns as higher interest rates impact valuations. “We expect a more ‘Fat & Flat’ than a secular bull market with more focus on alpha than beta. Oppenheimer said that investors are more likely to be focused on margins and less revenue. Beta measures an investment’s relative volatility and Alpha represents investment returns in relation to the wider market. Analysts noted that the traditional approach to the market of growth and value being used is no longer relevant. They also stated that it is possible that the market will be driven in the future by an eclectic mixture of factors and industries.
A smartphone with the Goldman Sachs logo.
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Goldman SachsAccording to them, we are now in a “postmodern” investing cycle. Here’s what the bank thinks is in store — and the stocks investors should own to cash in.
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