Goldman shows how to play the global economic comeback – with Tesla and more

Published Thu, Apr 8 202111:18 AM EDTUpdated Thu, Apr 8 202111:41 AM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Goldman Sachs has created two new baskets of stocks to help its clients trade a major global economic bounce back from the coronavirus pandemic. The Wall Street bank estimates global growth of 6.7% in 2021, "well above" consensus in the U.S., while in Europe and emerging markets the bank said the pace of economic growth and improved health "is underestimated." Its stock baskets — Global Cyclicals and Global Defensives — are designed to help investors select stocks that are riskier as well as those that can protect their portfolios. Cyclical stocks tend to do well when consumer discretionary spending is on an upward trend, while defensives typically provide consistent returns regardless of market conditions. Goldman's analysts led by Guillaume Jaisson included Tesla in their Global Cyclicals basket, among other automakers, in a research note published Thursday. Here are 10 stocks from each of the baskets: In its Global Cyclicals basket, Facebook and Disney are among Goldman's communications services picks, while automakers Tesla and Daimler are included under consumer discretionary. Also in Global Cyclicals are oil firm Chevron , Wall Street bank JPMorgan and Zurich Insurance . Goldman's tech picks include Apple and Samsung , while Rio Tinto is included in its materials category. All of the mentioned cyclical stocks have a three-year beta to the MSCI AC World Index of one or above, meaning their prices are likely to be more volatile than the rest of the market. Stocks in Goldman's Global Defensive basket include mobile networks AT & T and Verizon , retailers Walmart and Costco and consumer goods companies Coca-Cola and L'Oreal . Covid 19-vaccine maker Pfizer is a pick under healthcare, as is CVS Health , while Adobe features under IT. Utilities firms on the list include NextEra Energy . All of the mentioned stocks in Goldman's Defensive basket have a three-year beta to the MSCI AC World Index of below one, meaning they are likely to be less risky compared to the market. "Cyclicals are generally affected by macroeconomic changes and follow the cycles of the economy. They usually have higher volatility and are expected to perform well during economic expansions but typically underperform during recessions as sales and earnings drop," Goldman's analysts said. "Vice versa, Defensives tend to perform similarly in terms of sales and profitability no matter what the economy is doing," they added. "Defensives can help to protect investments during times of uncertainty but lag in recoveries," Goldman's analysts wrote. "Global Cyclicals have outperformed Defensives by 40% since the market trough in 2020," they added.

The Wall St. Bull is seen in the financial district in New York.

Brendan McDermid | Reuters

Goldman Sachs has created two new baskets of stocks to help its clients trade a major global economic bounce back from the coronavirus pandemic.

The Wall Street bank estimates global growth of 6.7% in 2021, "well above" consensus in the U.S., while in Europe and emerging markets the bank said the pace of economic growth and improved health "is underestimated."

Its stock baskets — Global Cyclicals and Global Defensives — are designed to help investors select stocks that are riskier as well as those that can protect their portfolios. Cyclical stocks tend to do well when consumer discretionary spending is on an upward trend, while defensives typically provide consistent returns regardless of market conditions.

Goldman's analysts led by Guillaume Jaisson included Tesla in their Global Cyclicals basket, among other automakers, in a research note published Thursday.

Here are 10 stocks from each of the baskets: