The US markets are showing some conflicting signs, making forecasting difficult. The main headwind, inflation, is down – but the labor market is strong, with unemployment falling and wages rising. The Federal Reserve raised interest rates at the fastest rate since the 1980s, bringing them from near-zero to more than 5% in the last 12 months, risking recession to try and keep a cap on prices.
But will the Fed’s efforts come to naught? Interest rate increases tend to affect the markets with a lag of 12 to 18 months, and we’re seeing inflation coming down now – the last data, for April, showed a 4.9% annualized rate of increase, far down from last year’s 9.1% peak. But that 4.9% is still more than double the Fed’s target rate.
This is the background to recent comments from Goldman Sachs chief David Solomon who believes inflation still poses a significant challenge to the economy.
“I sense that it’s going to be stickier, it’s come off its peak, but it’s going to be stickier and more resilient which is why we’re expecting that while the Fed may pause and will be data dependent, you might need to see higher rates to ultimately control it some more,” Solomon opined.
In such a stickier inflationary environment, investors are naturally going to move toward defensive stocks – the ones that can show resistance to a downturn. Using the TipRanks platform, we’ve pulled up details on two names that Goldman Sachs analysts are recommending as defensive equities. Here are the details.
Flywire Corporation (FLYW)
First up on our list is Flywire, an online payment processing service. The company took an interesting route into the crowded online payment niche, starting out as a specialist in the education sector. Since then, it has broadened its services to include payment processing across a global network, catering to the healthcare, travel, and B2B industries in addition to education. Flywire is equipped to handle customers’ verification and security compliance needs, operating in more than 140 currencies.
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