Goldman Sachs: Go Defensive When Picking Stocks

Sunday, 18 Sep 2011 02:47 PM

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Stock-market investors should pick equities that perform well in a sagging economy, investment bank Goldman Sachs advises.

Goldman Sachs analysts say they're shifting their recommended sector weights to reflect cuts they made to 2012 earnings growth for S&P 500 companies.

That means investors should buy consumer staples, telecom services and information technology stocks and less consumer discretionary, industrial and materials companies.

"We recommend a more defensive sector allocation," Goldman Sachs analysts report, according to MarketWatch.

All eyes will remain on the Federal Reserve.

Many are expecting an announcement possibly this week for a plan where the Fed sells short-term securities to load up on longer-term instruments in such a way that long-term interest rates remain low in hopes of fueling more economic growth.

"The Fed is really going to dominate next week," says Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont, according to Reuters.

"The market has been trying to work its way higher here, trying to feel if maybe the European thing won't cascade out of control."

Consumer confidence in the economy remains weak, and without more robust consumer demand, sluggish economic performance will remain.

The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment edged up to 57.8 from 55.7 the month before, which had been the lowest level since November 2008.

"The consumer is still very frustrated with virtually everything — 9 percent unemployment, still very tepid jobs creation and heightened job destruction," Lindsey Piegza, economist at FTN Financial in New York, tells Reuters.
 

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