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Stocks & ETFs to Pick From Goldman Sachs' Favored List in 2019

Sanghamitra Saha

Rising rates, overvaluation, recessionary fears and trade war concerns throughout 2018 have led key U.S indices into the red. However, things have started to improve at the start of 2019, thanks to dovish comments by the Fed chair Powell that the central bank is in no hurry to raise interest rates and an upbeat U.S. jobs report brought back risk-on trade to Wall Street (read: Risk-On Trade is Back: ETFs That Gained the Most).

Against this backdrop, Goldman Sachs appears bullish about the markets as it believes that the global economic slowdown is oversold. Goldman sees the S&P 500 (which was down more than 6% in 2018) closing 2019 at 3,000, implying a 17.7% gain from Jan 7 close, courtesy of cheaper valuation. Stocks are currently trading around 15 times earnings against 18 times at the start of 2018.

Investors should thus follow the below-mentioned ETF strategies, if they intend to copy Goldman Sachs’ strategies.

Bet on Quality Stocks

The firm recommends stocks that combine quality with a strong balance sheet. Companies like FedEx FDX, United Parcel Service Inc. UPS and International Business Machines Corporation IBM can offer “defensiveness" to the portfolio. Investors can also play FedEx-and-UPS heavy ETF iShares Transportation Average ETF IYT and IBM-heavy ETF First Trust NASDAQ Technology Dividend Index Fund (TDIV).

Alternatively, investors can take a look at quality ETFs like iShares Edge MSCI USA Quality Factor ETF QUAL and wide moat ETFs like VanEck Vectors Morningstar Wide Moat ETF MOAT and ELEMENTS Morningstar WideMoat Focus Total return ETN WMW (read: Winning ETF Strategies for 2019).

Bet on Cash

Goldman suggests investors to load cash in their portfolios as equivalents like three-month Treasury bills are currently offering healthy yields. So, investors can park their money in ultra-short duration cash-like ETFs.

Real returns of cash alternatives are improving. Yield on short-term Treasury bills outdoes U.S. inflation, meaning investors can now have real, inflation-adjusted return from cash for the first time in a decade, per Financial Times.

Funds like SPDR SSgA Ultra Short-Term Bond ETF ULST, iShares Ultra Short-Term Bond ETF ICSH and PIMCO Enhanced Short Maturity Active Exchange-Traded Fund MINT can be followed in this regard.

Target All-Cap Blend ETFs

Since Goldman strongly believes that the S&P 500 is likely to surge more than 15% this year, investors can try out some all-cap blend ETFs to gain a wider exposure to the markets. To do so, investors can play Strategy Shares US Market Rotation Strategy ETF HUSE, Global X Guru Index ETF GURU, LeaderShares AlphaFactor US Core Equity ETF LSAF, Vanguard U.S. Minimum Volatility ETF VFMV and JPMorgan U.S. Minimum Volatility ETF JMIN.

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International Business Machines Corporation (IBM) : Free Stock Analysis Report
ISHARS-TRAN AVG (IYT): ETF Research Reports
PIMCO-E SMETF (MINT): ETF Research Reports
ISHARS-LIQD INC (ICSH): ETF Research Reports
VANECK-MS WD MT (MOAT): ETF Research Reports
GLBL-X GURU IDX (GURU): ETF Research Reports
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
VANGD-US MINVOL (VFMV): ETF Research Reports
SPDR-SSGA US TB (ULST): ETF Research Reports
ISHARS-MS US QF (QUAL): ETF Research Reports
JPM-US MIN VOL (JMIN): ETF Research Reports
US-EQT ROT STR (HUSE): ETF Research Reports
ELEMT-LK MORN (WMW): ETF Research Reports
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