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Pro Analysis

Ignore earnings season and focus on Trump's agenda, Goldman Sachs says

President-elect Donald Trump boards the elevator to the lobby after meetings at Trump Tower in New York City on January 16, 2017.
Dominick Reuter | AFP | Getty Images
President-elect Donald Trump boards the elevator to the lobby after meetings at Trump Tower in New York City on January 16, 2017.

Goldman Sachs told clients that Donald Trump has made this earnings season obsolete.

The firm suggested investors should instead focus on how companies will benefit from the new administration's economic policies this coming year.

The S&P 500 is up 5.8 percent since the Nov. 8 election through Thursday.

"Stocks have surged ... since the election on the prospect of higher earnings under potential Trump policies, but consensus bottom-up 2017 EPS forecasts for S&P 500 have been unchanged," strategist David Kostin wrote in the note to clients at the end of last week.

"During the quarterly reporting season that ramps up this week, we encourage investors to focus less on actual 4Q results and more on management insights on how firms are positioned on five policy issues that will drive 2017 earnings revisions and share prices."

The five potential policies are a reduction in the corporate tax rate, a destination-based border adjusted tax, changes to interest deductibility and depreciation, fiscal spending and deregulation, according to Goldman Sachs.

The strategist said Trump's tax reform and fiscal stimulus agenda will boost S&P 500 earnings by 6 percentage points to 11 percent growth this year if it passes.

Goldman has a basket of stocks with the highest effective tax rates that it believes will benefit the most from the lowering of the corporate tax rate. The firm cited how this basket has already beat the S&P 500 by more than 4 percentage points since the election through Friday.

Here are seven stocks Goldman recommends in its "high tax rate" basket.