In their latest client note, Goldman strategists led by David Kostin noted that value shares will be more favored than cyclical stocks on a COVID-19 vaccine than cyclical stocks, per Bloomberg.
“Value stocks tend to have short-duration cash flows, so will outperform as rates rise, while cyclicals and defensives have similar durations on average.”
“The consensus view of investors is cyclicals will outperform when a vaccine is identified.”
“However, the correlation of returns with the prospects for a vaccine suggest value rather than cyclicals is the better tactical expression of this view.”
“Vaccine catalysts may coincide with the upcoming US election, which may also provide a tailwind to value in the near term.”