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As the likelihood of a hard landing this year rises, Barclays says investors should seek quality stocks that are not overly expensive. Large-cap tech stocks have been outperforming the market in 2023, with the S & P 500’s tech sector up more than 16%. However, Venu Krishna, Barclays’ head of U.S. equity strategy, warned against following this trend, citing elevated valuations, as well as inflation and interest rate risks. “Rather than chasing yet another crowded trade that is vulnerable to the next unwind, we recommend seeking safe haven among quality stocks at less demanding valuations,” Krishna wrote in a report on Monday. With the growing market uncertainty in mind, Barclays recommended a basket of quality stocks trading at lower valuations as a way to position for the growing risk of an economic downturn this year. Take a look at some of the names below: Health-care giant Johnson & Johnson made Barclays’ list. Shares have fallen 13% in 2023. The stock is one of eight names in the S & P 500 to have raised annual dividends consistently over the past 60 years. Barclays also highlighted Merck as a quality name that’s cheap. The pharmaceutical company is a notable winner in the Dow since the Federal Reserve began its latest rate-hike cycle . Shares are down more than 3% this year. About 7 out of 10 analysts covering Merck rate it a buy or are overweight on the stock, according to FactSet. They see upside of nearly 13%. Industrial names United Postal Service and 3M were also chosen as safe picks for a potential hard landing. UPS shares are up more than 7% in 2023, and the stock is a notable dividend increaser among the S & P 500 . Meanwhile, 3M is down more than 15% this year. Analysts see upside of 14% from here, according to FactSet. Several tech stocks made the list, including Microsoft and Accenture . Microsoft shares have gained 15% in 2023. More than 8 out of 10 analysts covering the stock rate it a buy, according to FactSet. The tech giant’s shares have been boosted by the recent boom in artificial intelligence . Accenture was a top performer in the prior trading week after the company announced it would lay off about 2.5% of its workforce , or 19,000 jobs. Shares are up more than 2% in 2023, and analysts see upside of more than 13%, according to FactSet. —CNBC’s Michael Bloom contributed to this report.
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