Goldman Sachs recently slashed its year-end target for the S & P 500 citing higher than expected interest rates. The bank now sees the S & P 500 shedding another 4% to 3,600 at year’s end. The dismal outlook comes after the Federal Reserve this week raised interest rates by 0.75 percentage point, its third consecutive hike of that size. The central bank also boosted its terminal rate to 4.6% by 2023, indicating one more 0.75 percentage point hike to come this year. That’s not a good backdrop for stocks and indicates that the Fed may be steering the US towards a hard landing and triggering a recession, according to Goldman. In that environment, it has a few recommendations for how investors can defensively position portfolios to take advantage of rising rates and shield against equity volatility. Where investors should look Goldman recommends investors prioritize short-duration equities relative to long-duration ones. “Stocks with cash flows weighted heavily towards the distant future are more sensitive to changes in the discount rate via higher interest rates,” said David Kostin in a Friday note. “Historically, short duration equities outperform long duration peers as real rates rise.” The median equity duration in Goldman’s short duration basket is 18.3 years, below the 21-year median of the Russell 1000. In rebalancing the basket, Goldman added names such as Macy’s, energy company Ovintiv and Ryder System. To be sure, long duration stocks have been “surprisingly resilient” in the face of higher real rates, Kostin said. Yields on the 2-year US Treasury note spiked Wednesday around the Fed’s interest rate hike, and continued to climb since. On Friday, yields for the note hit 4.266%, a 15-year high, on what higher rates mean for the economy going forward. Still, Goldman says to look towards history to make investing decisions going forward. “Given the balance of risk is skewed towards higher rates for longer, we recommend investors own Short Duration (GSTHSDUR) vs. Long Duration (GSTHLDUR),” said Kostin.