Goldman Sachs sees some safe-harbor stocks in trade-war storm

If you’re coming in from the wilderness, a creature void of form, these stocks might give you shelter from the storm.

Apologies to Bob Dylan, but we couldn’t resist tweaking a few lines from his 1975 song “Shelter from the Storm” to discuss some investment possibilities in the event of a trade war.

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President Donald Trump has dubbed April 2 “Liberation Day” when he will unveil a new round of tariffs at the White House. 

The plan includes sweeping reciprocal tariffs on imported goods, targeting “all countries” that impose duties on U.S. exports.

The tariffs have angered America’s allies, who have threatened to respond with tariffs of their own. And they have rocked the stock market and rattled economists, who are warning that a trade war, on top of other disturbing economic data, will boost the likelihood of a recession.

Mark Zandi, chief economist at Moody’s Analytics, now sees a 40% chance the U.S. will fall into a recession this year — nearly triple his estimate from January.

Economists have warned about the possible recessionary impact of President Donald Trump’s tariffs.

Goldman Sachs analysts warn of recession risk

Trump’s focus on tariffs dragged the S&P 500 into its worst first-quarter performance in five years, with more than $5 trillion in market value shredded in less than a month.

“During Trump’s first term, we saw tariffs increase on U.S. corn, wheat and soybeans, impacting U.S. farmers,” Chris Versace said in his recent TheStreet Pro column. “While those are likely candidates, we are reading potential targets for reciprocal tariffs that could be more service-oriented.”

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“We also have to consider the larger number of countries that could slap reciprocal tariffs on the U.S.,” he added.

Goldman Sachs analysts have warned the U.S. economy faces a sharply higher risk of recession over the next 12 months as tariffs reduce growth, stoke inflation and deepen the market’s first-quarter decline. 

“Our economists estimate a 35% probability that the U.S. economy enters a recession during the next 12 months,” Goldman said. “The historical equity market recession playbook implies a roughly 25% S&P 500 drawdown from the recent market peak.”

The investment firm noted that “slowing growth and rising uncertainty warrant a higher equity-risk premium and lower valuation multiples.”

Goldman recommends that investors focus on its so-called Incentive Portfolio of stocks with above-average earnings growth stability during the past decade, “as well as low recent correlation — positive or negative — to the major thematic drivers of ongoing market volatility.”

These drivers include the equity market’s pricing of U.S. economic growth, trade-policy risk and artificial intelligence.

Topping the list was Amdocs  (DOX) , a provider of software and services to telecom, media and other providers, which beat Wall Street’s first-quarter earnings and revenue forecasts in February. 

The St. Louis company’s shares have climbed nearly 7% since January and are up about 2% from a year ago. 

Goldman Sachs: Safe-harbor stocks in a trade war

Other companies on the list include Bank of New York Mellon  (BK) . The financial-services stalwart’s shares have surged 47% from a year ago and are up 9% year-to-date. 

Related: Analyst who predicted 2024 stock market rally offers blunt post ‘Liberation Day’ forecast

Another is grocery chain Kroger  (KR) . 

Melius Research downgraded Kroger to sell from hold on April 1 with a $58 price target. The investment firm noted that Walmart  (WMT)  was gaining share across most categories due to its “significant” price gaps to conventional operators, “significantly improved” service levels and fresh offerings and its “clear advantage on digital,” according to The Fly.

In addition, the firm called out Kroger’s own issues, including a lack of a permanent CEO and a CFO who is “unseasoned in grocery retail.” The company is also contending with its failed merger with Albertsons.

Kroger’s shares have climbed 10% since January and are up 16.4% from a year ago.

Goldman also cited automotive services company Valvoline  (VVV) , which has seen its shares fall 18% from a year ago. 

And it named credit-ratings firms S&P Global  (SPGI)  and Moody’s  (MCO) . Shares of both companies are up roughly 20% from a year ago.

Alphabet  (GOOGL) , Google’s parent, was the only member of the famed Magnificent 7 group of tech stocks to make Goldman’s list.

The company’s shares are down nearly 17% since January and up 1.6% from a year ago.

Last month, the search-engine, advertising and cloud-services giant definitively agreed to acquire cloud-security startup Wiz for $32 billion cash.

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