Investing like a economic downturn is coming will make no feeling, strategist warns

Time for a contact of optimism.

Recession considerations may be on the rise (see Google lookup developments below) thanks to soaring inflation, growing gasoline costs and an unpredictable conflict between Russia and Ukraine, but that won’t imply building out an all defensive inventory portfolio is the appropriate move, warns veteran JPMorgan sector strategist Mislav Matejka.

“We imagine it is wrong to placement for a recession supplied however extremely favorable financing problems, very powerful labour markets, beneath-leveraged customer, powerful corporate funds flows and banks’ potent stability sheets. The sector management continues to be possibility-on, and it is not constant with a continued slowdown,” Matejka reported in a new notice to customers.

Google queries for “economic downturn” are back on the rise.

Matejka thinks buyers need to stay bullish on financial institutions, mining, electrical power, insurance plan, autos, travel and telecom shares.

“We feel one should really look by means of the widespread ‘slowdown’ phone calls that are presently in vogue,” Matejka adds.

It truly is these economic slowdown phone calls from Wall Street — in part also reflecting fears of quicker-than-envisioned interest rate hikes — that has weighed intensely on stocks virtually two months into 2022.

The Dow Jones Industrial Typical (-6.2%), S&P 500 (-8.8%) and Nasdaq Composite (-13.4%) are all down for the 12 months.

Slowdown worries have hammered the at the time sizzling FAANG (Facebook’s mum or dad enterprise Meta, Amazon, Apple, Netflix and Google) elaborate even extra — the normal inventory in this cohort is down 19% 12 months-to-date. Meta is the worst performer, down virtually 40%.

In flip, traders have rotated into perceived safe and sound havens.

Gold prices have attained in 12 of the previous 15 classes as the yellow metallic knocks on the doorway of $2,000 an ounce. Shares of dividend-paying out, constant expanding soda giant Coca-Cola are buying and selling at a history large.

“Upcoming recession scare finest performed by means of lengthy bonds-quick commodities,” said the latest Lender of The us fund manager survey.

Other massive names on the Street agree that recession fears are potentially far too elevated right now.

Queens’ Higher education, Cambridge College president and Allianz advisor Mohamed El-Erian mentioned on Yahoo Finance Reside a recession this yr is not likely regardless of inflationary pressures.

“I feel for the United States, don’t under estimate the resilience of the U.S. economy. I think the greatest chance to the U.S. economic climate is a policy oversight [from the Federal Reserve]. That is the greatest threat,” El-Erian reported.

Brian Sozzi is an editor-at-huge and anchor at Yahoo Finance. Observe Sozzi on Twitter @BrianSozzi and on LinkedIn.

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