Key Takeaways

  • Goldman Sachs predicts 27% in CapEx spending in 2020
  • R&D expenses are set to decline 9%
  • Lower spending will slow the economic recovery

Large U.S. companies are tightening their purse strings as COVID-19 wreaks the economy. Goldman Sachs predicts S&P 500 cash spending will drop 33% during 2020 as firms prioritize liquidity amid the coronavirus slowdown. In dollar amounts this translates to a decline to $1.8 trillion from $2.6 trillion last year. 

"CapEx will decline by 27%, R&D by 9%, and cash acquisition spending by 49% (see chart), leading to a 26% plunge in investment for growth. Buybacks and dividends will also decline sharply in 2020, falling by 50% and 23%, respectively," said analysts in the latest U.S. Weekly Kickstart report. 

The report noted that stocks in Goldman's cash-spending baskets have lagged in 2020 as investors favor firms with "safe" balance sheets. For investors seeking dividends during a year when they're being slashed, analysts listed 50 S&P 500 stocks with the best combination of dividend yields and expected dividend growth. They include Century Link (CTL), H&R Block (HRB), Alliance Data Systems (ADS), Prudential Financial (PRU), AbbVie (ABBV), Hanesbrands (HBI), Hewlett Packard Enterprise (HPE) and KeyCorp. (KEY).

Less than 10% of the index has reported Q1 earnings so far. Goldman predicts a 15% EPS decline in the first quarter followed by a 123% plunge in Q2. For Q1, this would be the largest year-over-year decline in earnings reported by the index since Q3 2009 (-15.7%), according to FactSet.

Goldman chart
Source: Goldman Sachs.