Goldman Sachs Identifies 50 Stocks Poised for Higher Profitability Despite Slowing Macroeconomic Conditions

According to a recent report from Goldman Sachs, it seems that the worst of the profits recession is now behind us, despite the global earnings recession that has squeezed corporate profit margins for months. The S&P 500’s return on equity (ROE) rose by 34 basis points in the first quarter to 20.4%, indicating a light at the end of the tunnel for poor profits across the market. However, David Kostin, chief US equity strategist at Goldman Sachs, cautioned that the S&P 500’s overall ROE still remains below its level this time last year, which he primarily attributed to declining operating margins. Although the report identifies a basket of 50 stocks expected to have the highest ROE growth in the market over the next 12 months, Kostin doesn’t believe that profitability will substantially grow in the near term. Finally, Kostin noted that the performance of these ROE growth stocks is dependent upon whether the US economy experiences a hard or soft landing in the near term.