The uncertainty in the economic picture could put continuous pressure on U.S. equities into the end of 2023, and investors should focus on stocks that are returning cash to shareholders, according to Goldman Sachs. "The economic growth and inflation data flow could create a choppy path for equities in the next few months," David Kostin, Goldman's head of U.S. equity strategy, said in a note to clients.
Goldman is not recommending stocks that have dividend and buyback programs in place, rather than companies using cash on capital expenditures as well as research and development. The firm's total cash return basket, which consists of 50 stocks with the highest 12-month trailing yield from buybacks and dividend, has outperformed its Capex and R & D basket by 4 percentage points since the start of 2022. The total cash return basket includes stocks like Tapestry, MGM Resorts and Lowe's.