In the US stock market right now, efforts to keep labor costs down are paying off.
GOLDMAN SACHS: Buy stock in companies spending the least on employee pay
Investors are rewarding companies that are keeping labor costs low to an extent not seen since early 2010.
A group of companies that spend the least on employee pay has outpaced a basket of high-labor cost stocks by 13 percentage points over the past year, according to data compiled by Goldman Sachs. That's the biggest outperformance since early 2010.
And while it's not entirely surprising that the market would reward companies keeping costs in check, the divergence in performance highlights a broader theme: Investors see inflation rising in the near future, and want to be positioned accordingly.
Since wage growth tends to occur as inflation inches higher, investors want to own the companies best positioned to withstand that. That means the ones already successful in keeping wage costs low.
"Wage inflation is a factor in the equity market," a group of Goldman strategists led by David Kostin wrote in a client note. "Low labor cost firms will continue to outperform as wages rise."
If you're wondering which companies fit into the two categories, Goldman has kindly provided the components for both. Here's a look at the breakdown: