Wall Street investment bank Goldman Sachs (GS) is warning that a bear market is coming and telling investors to position their portfolios defensively.
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Story Highlights
- Goldman Sachs is growing increasingly pessimistic about the stock market.
- The investment bank is urging investors to move into safe haven stocks in sectors such as healthcare.
In a note to clients, Goldman Sachs says that market risks are growing due to the prospect of higher-for-longer oil prices and uncertainty about the U.S. economy. Goldman adds that the U.S. market is particularly vulnerable to a downturn given the rich valuations of many stocks.
As such, Goldman Sachs is urging investors to make adjustments to their portfolios and get defensive before its too late. “An equity market decline matching the most severe oil supply shocks in recent decades would reduce the S&P 500 level by 19% from current levels,” writes the bank.
The Stocks to Buy Now
Looking ahead, Goldman Sachs now favors stocks with secular growth profiles. This includes healthcare and materials stocks. At the same time, the bank cautions investors against holding stocks that have exposure to middle-income consumers who are likely to face an inflation shock in coming months.
Analysts at Goldman Sachs also caution investors against chasing any rebounds in beaten down software stocks. Rather, the bank urges investors to look at cybersecurity stocks whose products are likely to be in greater demand moving forward.
The top cybersecurity stocks that Goldman Sachs highlights include Palo Alto Networks (PANW), CrowdStrike (CRWD) and Fortinet (FTNT).
Comparing Cybersecurity Stocks
As one can see in the chart below, the stocks of CrowdStrike and Palo Alto Networks each have Strong Buy recommendations, while Fortinet carries a consensus Hold rating, meaning it is less favorable among analysts.
