Companies in the U.S. and abroad are under pressure to deal with the effects of the trade war. In the modern world, any trade dispute is a serious issue. However, the trade war between the U.S. and China has the potential to undermine the stability of the global economy.
According to various sources, the global economy was slowing down and coupled with trade war; these might increase the chance of a financial crisis. In this situation, people interested in the stock market should be careful when deciding which stocks to buy in 2019.
Goldman Sachs and stock market
Goldman Sachs is an American investment bank. Its headquarters are located in New York City. At the moment Goldman Sachs is one biggest investment banks in the world. It has a tremendous experience when it comes to the stock market. Also, it is worth mentioning that its analysts have the knowledge to analyze the latest trends of the U.S. as well as the global economy.
Several days ago, more specifically on August 9, Goldman Sachs’ strategy team published a report. The leader of the group is the banks’ chief U.S. equity strategist David Kostin. In this report, Kostin and his colleagues analyzed the situation and came to the conclusion that trade will continue in the future. According to this report, the chance to end the trade war decreased from 80% to 13%. Goldman Sachs’ U.S-China trade barometer which monitors the expectations among investors dropped from 80% as it was in April to current 13%.
Goldman Sachs created the strategy to deal with the problems. Based on this strategy, it is a good idea to buy stocks of service companies such as Microsoft, Amazon, etc. The reason is that service stocks have better earnings growth and stable gross margins. Also, stocks of service companies outpaced stocks of companies which manufacture products by five percentage points.
Another part of the strategy is that it is desirable to buy shares of companies which have low labor costs. The reason is that due to average economic growth and falling interest rates, this will increase the pressure on wages. Also, another advantage of such stocks is that they are cheap in comparison with other stocks.
Goldman Sachs’ report is a reminder that trade war is here to stay. People interested in the stock market should take this issue into consideration.