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%)."
Key Names From the List
- Under Armour (UAA) - Get Report
- Gap (GPS) - Get Report
- Foot Locker (FL) - Get Report
- Marathon Petroleum (MPC) - Get Report
- Discover Financial (DFS) - Get Report
- Gilead Sciences (GILD) - Get Report
- PayPal Holdings (PYPL) - Get Report (an Action Alerts PLUS holding)
- Activision Blizzard (ATVI) - Get Report
- Alphabet (GOOGL) - Get Report (an Action Alerts PLUS holding)
- Facebook (FB) - Get Report (an Action Alerts PLUS holding)
- AT&T (T) - Get Report
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