As market volatility spikes due to concerns regarding rising inflation and interest rates, investors should consider investing in cyclical sectors such as financials, according to analysts at Goldman Sachs. 
 
Companies with low labor costs should be most insulated from rising inflation and interest rates, according to the Wall Street bank, which views last week’s sell-off as presenting an opportunity to buy some “oversold” names. (See also: Next Bitcoin Bull Run to Occur in 2 Weeks: Pantera.
 
In a note to clients on Monday, analysts highlighted some two dozen stocks including Citigroup Inc. (C), Netflix Inc. (NFLX), Google parent company Alphabet Inc. (GOOG), Deere & Co. (DE), Molson Coors Brewing Co. (TAP) and Prudential Financial Inc. (PRU), which despite their recent underperformance, are positioned to gain on tightening monetary policy. Goldman noted that since Jan. 26, when the S&P 500 reached a record high, insurance giant Prudential stock had sunk 18%, while search engine leader Google dipped 15% and Netflix fell 9%. All aforementioned stocks traded up on Monday following the bullish report. 

Highlighting Stocks Resistant to Wage Pressure

 

"The typical correction took 70 trading days to trough and 88 days to recover," wrote David Kostin, Goldman's chief U.S. equity strategist. However, he added that an investor who bought the S&P 500 10% below its peak without waiting for a bottom would have experienced positive three-, six-, and 12-month returns in 75% of corrections.
 
“Rising inflation and interest rates should benefit cyclical sectors, such as Financials, relative to bond proxies,” wrote Kostin. “Firms with low labor costs should be most insulated from accelerating wages, a trend that our economist expect will persist in 2018.” The bank expects a strong global economy and tight labor market to keep driving wages higher.  

 

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