GOLDMAN SACHS: Buy these 13 stocks poised to dominate in a market where everyone is paralyzed by fear

• Ryan Hammond, vice president of US equity strategy at Goldman Sachs, says highly liquid stocks have outperformed in this turbulent market - and expects the trend to continue.
• He leans on historical data and notes a feedback loop that exists between liquidity, volatility, and returns.
• Hammond provides a list of 13 stocks that can help investors weather the market turmoil.
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Anxiety on Wall Street is reaching a fever pitch.

Earlier this week, US stocks experienced their worst single-day sell-off since 1987. Zooming out further, stocks have cratered more than 30% since topping out at historic highs on February 19. The moves downward have been swift and fraught with volatility.

But turmoil begets opportunity in financial markets - and investors looking to make the most out of these capricious times can find solace if they know where to look.

"High-liquidity stocks have outperformed low-liquidity stocks, consistent with a 'flight-to-liquidity' across risk assets," said Ryan Hammond, vice president of US equity strategy at Goldman Sachs. "We expect high-liquidity stocks will continue to outperform until the S&P 500 reaches its near-term trough."

He continued: "There is a feedback loop among liquidity, volatility, and returns, as high volatility reinforces low liquidity and vice versa."

To demonstrate his thinking in a historical context, Hammond provided the following chart which depicts the number of trading days with a 3% or more move. Clearly, volatility during the past month has been extraordinary.

"Changes in the S&P 500 (in both directions) have been large in magnitude; there have been 3%+ moves in the S&P 500 during 12 of the past 21 trading days, approaching the October 2008 experience," he said. "Liquidity has evaporated within US equity markets, magnifying the index-level moves during the ongoing bear market,"

To Hammond, the staggering amount of volatility in US markets is causing investor appetite for illiquid assets to dry up. He says bid-ask spreads - the de facto measure of liquidity - for the typical S&P 500 stock are the widest they've been over the past eight years.

Hammond provides the following chart demonstrating the increasing "illiquidity ratio" - defined as the 1-month average of the daily absolute value of returns divided by the dollars of trading volumes - in the marketplace. Currently, it's skyrocketing.

Listed below are 13 stocks, ranked in decreasing order of illiquidity ratio. By Hammond's logic, their highly liquid nature will make them the best performers against an illiquid backdrop.