Insider Monkey

10 Undervalued Stocks to Buy According to Goldman Sachs

Ramish Cheema
9 min read

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In this piece, we will take a look at ten undervalued stocks to buy according to Goldman Sachs. If you want to skip out background on the bank, then take a look at 5 Undervalued Stocks to Buy According to Goldman Sachs.

Even with turmoil in its ranks, investment bank Goldman Sachs continues to maintain its upbeat sentiment about a recession in the U.S. With the third quarter of 2023 underway, the U.S. economy has come quite far ahead from the doom and gloom that had plagued investors' minds last year. The economy, despite downward growth revisions later on, maintained growth during the second quarter and there is cautious optimism that the Federal Reserve just might forgo an interest rate increase later this month. At the same time, the labor market is also cooling, and inflation on the consumer front is dropping.

In its fresh analyst note, the bank believes that the odds of a recession taking place in America over the next year is 15%, down from an earlier 20%. The 15% odds are still higher than the 'soft landing' that Bank of America is projecting, but while the latter's shift is a recent one, Goldman Sachs has been one of the most cautious banks in the industry when it comes to recession speculation throughout the course of this year. The latest note from Goldman Sachs' chief economist Jan Hatzius, which comes a handful of weeks before the Federal Reserve decides whether to increase interest rate hikes or take another pause, outlines that there will be no rate hike in September, and if the data sets create space, then there won't be a rate hike in November either.

The economist added that there is little reason to fear any lag from earlier policy tightening, with a growth in disposable income from a surprisingly robust labor market also in the cards for next year. As to when the interest rates are going to come down, Hatzius believes that rate cuts are unlikely for at least more than two quarters with the first cuts expected to take place during the second quarter of 2024. The latest remarks come after a strong rally in the U.S. dollar which appears to have re calibrated demand for the greenback in global markets despite the hawkishness of the Federal Reserve seemingly appearing at its end.

It also follows recent remarks from Hatzius made to CNBC which came after the latest labor market report. According to him:

I think it's a very constructive report. We had a pretty good increase in non farm payrolls, in fact somewhat stronger than expected especially if you allow for some of the special factors, the yellow bankruptcy and the Hollywood writers strike. If you add that in your above 200 thousand. Household employment actually growing above 200 thousand as well. The increase in the unemployment rate that we saw, which is you know pretty sizeable, three tenths is pretty sizeable. But it was entirely driven by an increase is labor force participation, which is what you want to see. And then, the average hourly earnings number that showed a downside surprise, only a two tents increase, and that is also what the Fed wants to see because at this time wages are still growing somewhat faster than what is compatible with 2% inflation in the long term. So if I look at this, and then also if I bring in the JOLTS number, the job openings and quits numbers that we got early in the week, this is very consistent with a soft landing.

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