Goldman Sachs Group said that the tightening of the financial environment and the excessive economic slowdown and the increased likelihood of falling into recession are one of the reasons why investors in US stocks choose to invest steadily.

Strategist David Kostin and his team wrote in a report on Sunday: "in the current worrying stock market investment environment, we believe thatStability is more attractive than growth or value.At a time of slowing GDP and tightening [financial conditions indices], stocks with stable growth and low share price volatility usually perform well and are currently undervalued. "

Sectors dominated by growth stocks include information technology (XLK.US), consumer discretionary products (XLY.US) and communications services (XLC.US). Sectors dominated by value stocks include finance (XLF.US), industry (XLI.US), energy (XLE.US) and essential consumer goods (XLP.US).

Kostin said growth and value deals will consolidate horizontally for the rest of 2022.

He added: "if the stock market is to restore growth stocks and continue to outperform the market, investors will need to maintain confidence that the economy will slow but will not fall into recession and that inflation will soften enough to reduce the need for the Fed to raise interest rates significantly further. Such an outcome is possible, but equity investors doubt whether the Fed can achieve these goals without triggering a recession in 2023. Until uncertainty is reduced, it will be difficult for growth stocks to outperform the market. "

The plight of growth and value investments has raised concerns about broader market performance. "in the past three months, the correlation between growth and value investments in the S & P 500 has been the strongest in 20 years since the tech bubble burst in 2001," Kostin said.

This correlation may be explained by the fact that growth stocks are heavily weighted in the S & P 500 and are now popular among many investors. and the importance of Fed policy and interest rate environment in promoting growth / value alternation and overall stock market returns. "