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Goldman: Buy Aerospace, Defense Stocks Amid Recession, Trade Fears

Goldman: Buy Aerospace, Defense Stocks Amid Recession, Trade Fears
(Dollar Photo Club)

By    |   Wednesday, 11 September 2019 09:25 AM

Goldman Sachs recommends aerospace and defense stocks because of their defensive qualities and zero reliance on China sales.

The firm’s recommendation comes as a response to the drop in the ISM manufacturing index, CNBC reported.

When a recession didn’t occur following the ISM dropping below 50, Goldman Sachs pointed out that aerospace and defense stocks outpaced the growth of the S&P 500 in the six months after, CNBC explained.

“During the past 10 years, Aerospace & Defense has been least sensitive to US and global economic growth across Industrials subsectors,” Goldman Sachs analyst David Kostin said.

The firm pointed out that the three S&P 500 aerospace and defense companies “with the lowest reported sales to Asia Pacific” are TransDigm, Huntington Ingalls and Northrop Grumman.

Goldman is bullish on stocks for the next two years, expecting the S&P 500 will climb 4% to 3100 points by the end of this year and 14% to 3400 by the end of next year.

“Our economists expect that a U.S. recession is unlikely during the next two years,” Kostin said.

However, other experts have a much more dire economic view.

Harvard University economist Lawrence Summers warns that the odds of a recession before 2021 at nearly 50%.

The former Treasury chief also described to the Wall STreet Journal a “black-hole scenario” in which rates could get stuck at zero.

“I haven’t been this alarmed since the financial crisis,” he told WSJ.com.

Concern among Americans about a recession has been rising. Six in 10 saw a recession as either “very likely” or “somewhat likely” in the next year, according to a new Washington Post-ABC News poll.

To be sure, a protracted trade war between China and the United States, the world’s largest economies, and a deteriorating global growth outlook has left investors apprehensive about the end to the longest expansion in American history.

The recent rise in U.S.-China trade war tensions has brought forward the next U.S. recession, according to a majority of economists polled by Reuters who now expect the Federal Reserve to cut rates again in September and once more next year.

Trade tensions have pulled corporate confidence and global growth to multi-year lows and U.S. President Donald Trump’s announcement of more tariffs have raised downside risks significantly, Morgan Stanley analysts said in a recent note.

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Goldman Sachs recommends aerospace and defense stocks because of their defensive qualities and zero reliance on China sales.
goldman, aerospace, defense, stocks
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2019-25-11
Wednesday, 11 September 2019 09:25 AM
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