Markets love a catchy name or phrase to succinctly explain a popular trade. We’ve had the Magnificent Seven, the TACO trade, and the Nifty 50.
Now, say hello to the HALO trade.
Investors have been rewarding certain areas of the market as they look for a safe haven from AI disruption and as the war in Iran creates fresh volatility.
HALO stands for heavy assets, low obsolescence and describes companies that rely on substantial physical capital and durable economic relevance.
Goldman flagged the HALO trade in a note on Monday, but the term was coined in February by Josh Brown, CEO of Ritholtz Wealth Management as AI disruptions fears were tanking the tech stocks.
“I’m using the backronym H.A.L.O. to describe the types of stocks that I expect to serve as a winning haven from this year’s feverish pitch of disruption fear,” Brown wrote in a February 8 note.
“These are undistruptable companies from an AI standpoint. There’s nothing Sundar Pichai and Sam Altman can take from them,” he noted.
Understanding the ‘HALO’ trade
Brown said that HALO is the most important investment theme of the year and that year-to-date outperformance of the energy, materials, and consumer staples sectors demonstrates this.
Goldman introduced its HALO framework in a February 24 note, announcing a new capital-intensive bucket, which outperformed its capital-light counterpart.
The firm said that HALO stocks have two defining characteristics. The first is business models based on significant physical capital with high barriers to replication. This could mean complex regulatory hurdles, hefty costs, or an existing infrastructure network.
The second factor is persistent economic relevance. Goldman listed pipelines, utilities, transport infrastructure, and critical equipment as examples.
Goldman said as markets reward HALO stocks, “asset intensity becomes a key driver of valuations and returns.”
Exxon Mobil and Walmart are examples of HALO stocks
When determining whether a stock meets the HALO criteria, Brown says it’s as simple as asking: “Will chatbots and LLMs lessen or eliminate the need for (blank) in the near future?”
Exxon Mobil, along with most energy stocks, fall in Brown’s HALO bucket. Brown also flagged Valero Energy and Baker Hughes.
Walmart, McDonald’s, Starbucks, and Martin Marietta are some of the other HALO examples he named.
The capital-intensive basket that Goldman highlighted in its HALO note, included utilities, energy, and industrials sector names, among others.
The bull case for the ‘HALO’ trade
The macro tailwinds are set to lift HALO stocks higher, Goldman said.
“Higher real yields, geopolitical fragmentation and supply chain rewiring have shifted equity leadership back toward tangible productive assets: markets are rewarding capacity, networks, infrastructure and engineering complexity.”
AI worries, meanwhile, have reshaped the narrative around tech stocks, making capital-intensive companies that have physical barriers to replication and economic importance more attractive in today’s market.
The HALO trade emerges amid a broader market rotation away from tech as investors look for defensive plays to hedge AI disruption fears.
“Fiscal expansion, higher replacement costs, re-regionalisation and a manufacturing rebound all support Capital Intensive sectors,” Goldman said.
The war in Iran is expected to increase government spending and potentially reignite inflation. Trump has made a manufacturing revival and onshoring supply chains a key focus of his second term in the White House.
