Goldman Sachs Devises Different Strategies Depending on Trade War Outcome

If the U.S.-China trade war escalates, investors should be betting on domestic-focused U.S. stocks, according to Goldman Sachs.

If the tensions ease, however, China-exposed companies would likely outperform, the bank said in a report released Tuesday. The Goldman Sachs analysis highlighted S&P 500 companies that have notable levels of revenue or asset exposure to the China.

“If trade tensions continue to rise and new tariffs are proposed and implemented, stocks with the highest domestic sales exposure should outperform,” said the report, which was authored by Goldman chief U.S. equity strategist David Kostin and others from the bank.

If tensions moderate, then investors should look at stocks with over 10 percent revenue or asset exposure to Greater China, Goldman said. Those companies with significant Chinese sales are “at risk from continued escalation of the trade war,” and most are concentrated in the information technology sector, specifically semiconductors and related equipment, the bank said.

In 2017, companies in the S&P 500 index derived 30 percent of their revenues from international sources — including 8 percent of the total from Asia Pacific and 10 percent from Europe. The information technology sector has the highest international revenue exposure at 60 percent, followed by the materials sector at 49 percent, the report said.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza