- “The economy is defying gravity” after GDP grew close to 5% in the third quarter, according to JPMorgan portfolio manager Phil Camporial.
- Camporale said the three clear signs of a recession were nowhere to be found.
- If there is no recession, as Camporial expects, investors should buy high-yield bonds.
According to JPMorgan portfolio manager Phil Camporial, the recession that everyone has been waiting for for the last 18 months is not going to come immediately after the release of third quarter GDP data.Thank you for reading this post, don't forget to subscribe!
The US economy recorded GDP growth of 4.9% in the third quarter, representing its strongest quarterly growth since the end of 2021, and this follows several quarters of above-trend growth.
He said, at that pace, the economy is not showing any signs of slowing down, they have not shown any signs of recession.
“The economy is defying gravity right now, and this is the severity of this interest rate cycle that no one saw coming,” Camporial told CNBC on Thursday.
With a recession potentially averted, as they hope, investors should buy high-yield bonds that are yielding above 9%.
“We really like the high yield of America [bonds], High yield is not a bearish business in America. Soft landing is not a recession. It’s also higher over the long term, and a high-yield instrument yielding 9% is really attractive,” said Camporial.
To figure out whether the economy is about to enter a recession soon, he said investors need to keep an eye on three big things: GDP, the job market and inflation.
And right now, on all three fronts, it doesn’t look like a recession is imminent.
On GDP, Camphorial highlighted that growth of around 5% is exceptionally strong, and most importantly, it is the labor market that stands out amid the scary headlines of an impending recession.
“Labor market [is] The canary in the coal mine. That’s what matters most here,” he said.
The labor market has been quite strong in recent months, with the economy adding an average of 266,000 jobs each month over the past three months. Additionally, there are 1.5 jobs for every unemployed person looking for work, and weekly initial jobless claims hover around 200,000, which is exceptionally low.
Finally, recent inflation readings show that the Federal Reserve has made continued progress in reaching its target of about 2%.
Ultimately, this means the Fed has a greater risk of being dovish than tight, because they “cannot allow inflation to rise again,” Camporial said.
With this in mind, he said he expects each Fed meeting to be “live” in terms of changes in interest rates, and the two options going forward are either that interest rates remain high for a longer period of time, or even Higher in the long run. And according to Camporial, in any of these scenarios, high-yield bonds should work just fine.