50 Stocks Goldman Sachs Thinks Can Triumph Over Wage Inflation

Looking for stocks that could outperform during the current period of labor inflation? Try building a portfolio of these 50 stocks.

Author:: Brian Sozzi
Publish date:: Jun 19, 2018 9:22 AM EDT

Looking for stocks that could outperform during the current period of labor inflation? Try building a portfolio of these 50 stocks.

Let's just call this the Jerome Powell Stock Portfolio.

With the Fed chairman sounding the alarm on inflation, notably wage inflation, investors should get positioned accordingly. Not all companies could see their profits thrive during periods of wage inflation -- for example, restaurant companies such as McDonald's (MCD) - Get Report may fall under pressure as they are forced to lift wages to keep talent.

"Reflecting the tight labor market, the leading signal from survey data suggests that wage growth should soon accelerate above 3% from its current pace of 2.6%," says Goldman strategist Ben Snider. "When wages rise faster than prices, margins suffer. Investors should focus on sectors and stocks least exposed to this risk."

Enter Goldman's list of 50 companies that have a fighting shot to triumph over inflation given their relatively low labor costs. And by extension, their stock prices could outperform the broader market. In fact, this basket of 50 companies Goldman details below is already beating the market handily.

Says Goldman Snider, "Our basket of stocks with Low Labor Costs has outperformed the S&P 500 I:GSPC by 21 percentage points since breakeven inflation began to rise in early 2016, and has continued its outperformance so far in 2018 (7.0% vs. 4.9%)."