(Bloomberg) -- Investors should focus on companies with stable earnings growth against the backdrop of a slowing economy and tightening policy, according to strategists at Goldman Sachs Group Inc.

“Environments of slowing economic growth and tightening financial conditions have historically supported the outperformance of stocks with ‘quality’ attributes,” strategists led by David J. Kostin wrote in a note dated July 1. They recommend firms that have steady profits, the health care sector and companies with a combination of high dividend yield and growth for the second half of the year. 

US stocks just finished the worst January through June period in over half a century, but investor sentiment remains dour as they face a triple whammy of sticky inflation, recession risks and the threat to corporate profits from sinking consumer confidence. Goldman strategists said last week that earnings margins for the median S&P 500 company will likely decline next year, whether or not the economy falls into a recession.

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Goldman’s custom stable growth basket, which screens for stocks with low earnings volatility, is down 15% this year, outperforming a 20% slump for the S&P 500. The median stock trades at a 13% valuation premium to the median Russell 1000 stock, according to the strategists.

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