The uncertainty in the economic picture could put continuous pressure on U.S. equities into the end of 2023, and investors should focus on stocks that are returning cash to shareholders, according to Goldman Sachs. “The economic growth and inflation data flow could create a choppy path for equities in the next few months,” David Kostin, Goldman’s head of U.S. equity strategy, said in a note to clients. The Wall Street firm expects a slowdown in GDP growth on the horizon, driven partly by the resumption of student loan payments and the impact of higher mortgage rates on the housing market. It forecast real GDP growth to decline to 1.3% in the fourth quarter from 3.1% in the third quarter. Meanwhile, Goldman said inflation could reaccelerate after months of easing. Specifically, the firm said core CPI, which excludes volatile food and energy prices, could increase to 0.4% in January 2024 from 0.2% in July. “These factors could lead investor confidence in a soft landing to decline temporarily, weighing on risk sentiment and equity prices,” Kostin said. Goldman is not recommending stocks that have dividend and buyback programs in place, rather than companies using cash on capital expenditures as well as research and development. The firm’s total cash return basket, which consists of 50 stocks with the highest 12-month trailing yield from buybacks and dividend, has outperformed its Capex and R & D basket by 4 percentage points since the start of 2022. The total cash return basket includes stocks like Tapestry, MGM Resorts and Lowe’s. “When investors perceive there to be little economic slack late in the cycle, investors are generally skeptical of large plans to invest for growth due to uncertainty about the likely returns on those investments,” Kostin said. “Instead, in these environments investors usually reward firms returning cash to shareholders.” While seeing some fluctuation in the economic data going forward, Goldman thinks the odds of a recession in the U.S. are very low. In fact, the firm cut its recession odds to just 15%, saying the Federal Reserve won’t hike interest rates this month and could be done altogether. Goldman expects the S & P 500 to end the year at 4,500, just 1% above Friday’s close of 4,457.49. Goldman’s target is well above the average forecast of 4,372 among the top 15 Wall Street strategists, according to CNBC Market Strategist Survey. — CNBC’s Michael Bloom contributed reporting.