Here's what Goldman Sachs is telling clients to do to navigate the bear market

Published Thu, Mar 12 20203:06 PM EDT

(This story is for CNBC Pro subscribers only.) Goldman Sachs saw the market decline stretching to a bear market, and here's what the bank is telling its clients to do in this swift market downturn. The S & P 500 joined the Dow Jones Industrial Average in the bear market territory on Thursday, ending the stock market's historic 11-year bull run. A bear market marks a 20% decline from all-time highs. Goldman called the demise earlier this week , forecasting deeper losses ahead. Goldman advising clients to buy companies with strong balance sheet as the recent collapse in oil prices put pressure in the high yield credit market. "Stress in the oil market, and with it the credit market, is likely to continue to benefit stronger balance sheet companies," Peter Oppenheimer, Goldman's chief global equity strategist, said in a note this week. "The growing risks of a global recession – or even the risks that this is priced as a likely scenario – make credit look very vulnerable." Goldman has created a portfolio singling out 50 S & P 500 companies with strong balance sheet. The bank uses the Altman Z-score, a grading tool developed to forecast bankruptcies, to measure five financial ratios — capital to assets, retained earnings to assets, operating income to assets, leverage ratio, and sales to assets. The tool has proven to not just endure economic difficulties. It has a long track record of beating the market, returning 247% since its inception in 2008, compared with the S & P 500′s 208% rise. Goldman highlighted Monster Beverage , a classic defensive stock, as one of the names with a high Altman Z-score. The stock outperformed the broad market so far during the sharp declines, down only 6% versus the S & P 500's 14% losses. Software compan y Intuit as well as chipmaker Nvidia also represent strong financials. These two stocks are holding up relatively well in the market turmoil, with Intuit and Nvdia only losing 6% and 5% this year. Growth trumps value Perhaps counter-intuitively, Goldman prefers growth stocks in this tough market environment to their value and cyclical counterparts. "Defensive growth has outperformed cyclical and value parts of the equity markets since the financial crisis and the impact of the coronavirus, at least in the short term, further strengthens this trend," Oppenheimer said. The outperformance is likely to continue until inflation and growth expectations start to rebound, the strategist noted. Within growth stocks, the bank favors information technology names particularly in software and services. Goldman had cautioned that semiconductors and tech hardware stocks are less attractive as they face short-term supply chain and demand uncertainty.

(This story is for CNBC Pro subscribers only.)

Goldman Sachs saw the market decline stretching to a bear market, and here's what the bank is telling its clients to do in this swift market downturn.