Goldman screens for best and worst stocks for tightening financial conditions
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Financial conditions are currently close to the easiest on record, but tightening is on its way.
Money markets are pricing 100% of a quarter-point rate hike in March and a significant change of a half-point rise. The Nasdaq (COMP.IND)
(NASDAQ:QQQ) had had its worst January ever.
The Goldman Sachs Financial Conditions Index has five components:

The 10-year Treasury yield (NYSEARCA:TBT)
(NASDAQ:TLT), 45.1% weighting
Corporate credit spreads (iBoxx Domestic Non-Financials BBB 15Y+ over 10-year), 39.6%
The Goldman Sachs broad trade-weighted index, 6%
The S&P 500 (SP500)
(NYSEARCA:SPY) scaled by 10-year moving average of earnings, 4.9%
The midpoint of target fed funds, 4.4%.

As the FCI tightens defensive stocks and those with quality factors outperform, Goldman strategist David Kostin and team say.
They screened the Russell 3000 (NYSEARCA:IWV) for stocks with strong balance sheets, high margins and above-average free cash flow yield:

Moderna (NASDAQ:MRNA), FCF yield 17%
Coterra Energy (NYSE:CTRA), 16%
Regeneron Pharma (NASDAQ:REGN), 13%
Louisiana-Pacific (NYSE:LPX), 9%
Skywords Solutions (NASDAQ:SWKS), 8%
United Therapeutics (NASDAQ:UTHR), 7%
Royal Gold (NASDAQ:RGLD), 7%
MKS Instruments (NASDAQ:MKSI), 7%
Qualcomm (NASDAQ:QCOM), 6%
SEI Investments (NASDAQ:SEIC), 6%
Vertex Pharma (NASDAQ:VRTX), 6%

They also screened on the other end for stocks with a high rate of FCF burn relative to cash on the balance sheet:

Rivian Automotive (NASDAQ:RIVN), implied end 2022 cash -$4.236B
SunRun (NASDAQ:RUN), -$1.243B
Gevo (NASDAQ:GEVO), -$706M
PureCycle Technologies (NASDAQ:PCT), -$396M
PRA Group (NASDAQ:PRAA), -$374M
ViaSat (NASDAQ:VSAT), -$360M
GlobalFoundries (NASDAQ:GFS), -$231M
Riot Blockchain (NASDAQ:RIOT), -$189M
Freshpet (NASDAQ:FRPT), -$181M
Caravana (NYSE:CVNA), -$176M

This strategist says the Fed will need more than rate hikes to tackle inflation.