Goldman's playbook on what to buy and sell with the U.S. dollar surging

Published Mon, Sep 26 20227:51 AM EDTUpdated Mon, Sep 26 20229:28 AM EDT

The surging U.S. dollar is the new big worry in the markets, adding to the pain from central bank rate hikes that have sent the S & P 500 back to near its lows for the year. But there is a way to play the booming greenback. The British pound hit a record low against the dollar on Monday and the euro reached the lowest since 2002. The U.S. Dollar Index , which measures it against a basket of currencies, is up 9% the last three months and 18% this year, sizable moves in the currency markets. A strong dollar generally is not necessarily bad for U.S. companies and the market. However, when you have a rapid strengthening like we are seeing now, it can wreak havoc on financial markets and some companies' bottom lines. How to trade it Goldman Sachs has two portfolios that it gives to clients on how to protect and profit from the strong U.S. dollar, which can crimp profits of multinationals by making their products more expensive for overseas buyers. What to buy For those looking for a long trade, Goldman gives clients the U.S. stocks that have all domestic sales so they are not subject to the same currency exposure as multinationals. Shares of these companies could see increased demand from investors as they look to shelter in domestic players not subject to any currency risk. Here are some of the stocks in the Goldman basket: Notable names on this list include Chipotle , CVS Health and Dollar General . What to sell On the flip side, there are certain names investors should avoid or for the nimble traders, bet against in this environment. Goldman has a basket of companies that get a large majority of their sales from outside the U.S., making them vulnerable to the latest surge in the greenback. Here are some of the names in that basket. Some surprising companies on this list include Netflix , Alphabet and Booking Holdings . To be sure, if the dollar's run was to turn dramatically, then these stocks could be among the first to bounce. However, even if that occurs they could still be at risk over the longer term as there is a lag effect on the dollar's impact on their earnings. With the greenback up so much already this year, their earnings estimates could still be at risk even if the dollar's run slows a bit. — With reporting by CNBC's Michael Bloom.