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Stocks have had one of their worst starts to the year in history amid the looming threat of stagflation—persistently 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 of the market.
Some of Wall Street’s biggest firms now say it’s time to buy—here is where they see opportunities.
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With surging inflation and geopolitical uncertainty from Russia’s invasion of Ukraine already dragging markets lower this year, most experts are now warning that the economy is about to be plagued by stagflation, and recession risks are rising.
Top Goldman Sachs strategist Christian Mueller-Glissmann says that stagflation—a situation in which inflation is high, economic growth slows and unemployment remains elevated—is already here.
With stagflation looming, “cash flow and balance sheets are coming into focus,” according to analysts at Jefferies, who point out that stocks with high dividends that are “cash machines” typically outperform the market during periods of high inflation and slowing economic growth.
The firm recommends healthcare picks such as Pfizer and Medtronic, as well as several consumer companies including Procter & Gamble, Best Buy, Hasbro and Home Depot.
Goldman Sachs, meanwhile, recommends stocks that have been beaten down 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 firm particularly likes energy-related stocks such as Exxon Mobil and Sunrun, while also predicting a rebound in some consumer and retail stocks—namely Uber, McDonald’s, Nike, Target and Estée Lauder.