(Bloomberg) -- The stagflation trade is standing out in a month where almost every stock benchmark and thematic index are weakening.

Sectors across the US and Europe that are more exposed to inflation risks, such as consumer products and real estate, have seen their equities under pressure, dragging the S&P 500 down more than 4% so far in April. By contrast, a rally in oil prices have boosted the stocks of energy companies. 

While the US economy has been robust over the past few months, GDP forecasts are now signaling lower growth starting in the second half of the year.

A Goldman Sachs Group Inc. proxy index that offers a pair trade of going long on a typical stagflation winner while shorting a loser, has gained almost 5% since the start of April and is set for the biggest monthly gain in a year. 

The Goldman index’s top 10 longs include Microsoft Corp., Mastercard Inc. and Caterpillar Inc. Among the shorts are Abercrombie & Fitch Co., Super Micro Computer Inc. and KLA Corp.

With the path toward 2% inflation in the US proving stickier than estimated, prompting investors to dial back rate cut expectations, the attention will also eventually turn to the economic growth outlook’s impact.

Read more: Traders Pile Into Contrarian Bet That Fed Will Front-Run Cuts

--With assistance from Michael Msika.

(Adds outlook for US economic growth in third paragraph)

©2024 Bloomberg L.P.