Analysts reveal their top stock picks to beat stagflation and outperform choppy markets

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Stocks have had one of their worst starts to the year in history amid the looming threat of stagflation — stubbornly high inflation coupled with stagnant economic growth — but analysts say it’s time to buy companies with high dividend yields. and strong cash flows that will outperform the rest. From the market

Some of Wall Street’s biggest firms are now saying it’s time to buy – this is where they see opportunities.

Richard Drew/ASSOCIATED PRESS

key facts

With rising inflation and geopolitical uncertainty from the Russian invasion of Ukraine already dragging markets lower this year, most experts now warn that the economy is on the verge of stagflation and risks of recession are increasing.

Goldman Sachs chief strategist Christian Mueller-Glissmann says that stagflation, a situation in which inflation is high, economic growth slows and unemployment remains high, is already here.

With stagflation looming, “cash flow and balance sheets are becoming apparent,” according to analysts at Jefferies, who note that high-dividend stocks that are “ATMs” often outperform the market during periods of high inflation and slowing economic growth.

The firm recommends health care picks like Pfizer and Medtronic, as well as several consumer companies, including Procter & Gamble, Best Buy, Hasbro and Home Depot.

Meanwhile, Goldman Sachs recommends stocks that have taken a hit in recent months and now look cheap, including vaccine maker Moderna, investment manager Blackstone and semiconductor company Micron Technology.

JPMorgan also says it’s time to buy. The company particularly likes energy-related stocks such as Exxon Mobil and Sunrun, while also predicting a rally in some consumer and retail stocks, including Uber, McDonald’s, Nike, Target and Estée Lauder.

Surprising fact:

With the S&P 500 down about 8% in 2022, markets have had one of their worst starts to the year in the post-World War II era, according to a recent JPMorgan note. The only other times in recent history that the benchmark has worsened in the first few months of the year was during the 2008-09 global financial crisis and the 2020 Covid pandemic.

crucial quote:

“Recent market volatility has created buying opportunities,” Goldman analysts said in a recent note.

Key Background:

With inflation at a 40-year high, up 7.9% from a year ago, the Federal Reserve raised interest rates on Wednesday for the first time since 2018, by a quarter of a percentage point. Fed officials have been warning of the “highly uncertain” economic impact of Russia’s invasion of Ukraine, saying earlier this week that higher energy prices as a result of the conflict will likely “create additional upward pressure on the inflation and will weigh on economic activity. The central bank is now forecasting six more rate hikes this year and three more in 2023 (up from a previous forecast of three rate hikes each year).