Goldman Sachs Still Says Sell-Off Coming – 5 Safe Conviction List Picks

Goldman Sachs' Conviction List recommends five "safe" stock ideas, including Abbott Laboratories, AT&T, Bank of America, Duke Energy, and Kodiak Gas Services, for investors anticipating a potential market drawdown over the next 1-2 years. This guidance comes amidst record market highs, with the S&P 500 surpassing 6,800 and the Dow Jones Industrial Average closing above 47,000, fueled by cooler-than-expected inflation data and heightened expectations for Federal Reserve interest rate cuts. While acknowledging some elements resembling past tech bubbles, Goldman Sachs differentiates the current environment by fundamental growth, robust balance sheets, and incumbent dominance in AI, positioning these dividend-paying picks for resilience.

Analysis

Goldman Sachs' Conviction List identifies five "safe" stock picks (Abbott Laboratories, AT&T, Bank of America, Duke Energy, Kodiak Gas Services) for investors anticipating a potential market drawdown over the next 1-2 years. This guidance comes amidst a robust three-year bull market, with the Dow Jones Industrial Average closing above 47,000 and the S&P 500 surpassing 6,800, fueled by cooler-than-expected inflation data and optimistic corporate earnings. The S&P 500 has already seen a 16% increase in 2025 and a 30% rise from its April lows, suggesting a potentially overheated market.

While acknowledging elements of investor behavior and market pricing that resemble previous bubbles, Goldman Sachs differentiates the current environment. The firm notes that technology sector appreciation is fundamentally driven, leading companies possess robust balance sheets, and the AI space is dominated by incumbents, contrasting with speculative bubbles. The recommended stocks are characterized by strong dividends, ranging from 1.87% for Abbott Laboratories to 5.05% for Kodiak Gas Services, positioning them as defensive plays.

Bank of America reported strong Q3 results, with EPS up 31% and revenue growing 11% year-over-year, exceeding analyst estimates of $1.06 vs. $0.95 EPS and $28.24 billion vs. $27.5 billion revenue. Abbott Laboratories and Kodiak Gas Services offer double-digit potential gains to Goldman Sachs' price targets of $157 (17%) and $43 (16%), respectively. AT&T, despite ongoing restructuring, maintains comprehensive Wall Street support with 17 Buy ratings, while Duke Energy benefits from its presence in growing regions.

Key Decisions for Investors

• Investors should consider incorporating high-dividend, fundamentally strong stocks from Goldman Sachs' Conviction List to mitigate potential market drawdown risks, especially given current record market highs and the S&P 500's significant year-to-date gains.
• Evaluate individual company fundamentals, such as Bank of America's strong Q3 earnings and the growth potential indicated by price targets for Abbott Laboratories and Kodiak Gas Services, as these underpin resilience.
• Monitor Federal Reserve interest rate policy and inflation data closely, as continued rate cuts and stable inflation could further support market sentiment or, conversely, signal an extended period of high valuations.