Earnings season is around the corner and many investors will be watching for signs of an economic slowdown.
Baird Managing Director and Market Strategist Michael Antonelli joins Yahoo Finance Live to weigh in on whether market volatility will continue. Antonelli is in the “no recession camp” and advises investors in the same camp to look at industrials and financials stating “I think we need to be picking through the industrial sector.”
Antonelli remains optimistic about the “no recession” outlook—noting six factors the National Bureau of Economic Research (NBER) looks at in order to determine a recession and of the six, five remain positive.
Antonelli sees this as one of the many signs that a recession is not on the horizon, noting “things that cause a recession just aren’t flashing.”
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor’s note: This article was written by Eyek Ntekim
Video Transcript
BRAD SMITH: In the no recession mindset, what is the top trade that emerges?
MICHAEL ANTONELLI: You certainly could look at just the index in and of itself. You could say I’m sticking with a 60/40. I’m sticking with the overall indices. That would be a trade that would be pretty standard fare, if you were in the no recession camp. If you’re in the no recession camp, I think you’re also looking at industrials. I think you’re looking at financials, which both have done very well over the past few months.
Industrials– I’m really interested in industrials. I know telecom. I’m not– sorry. I know communications and tech takes up the lion’s share of what we talk about. But if you were to look at the industrial sector, it spent a couple of years going nowhere, going sideways. And it just made a new all-time high recently. So I think we need to be posting through– picking through the– picking through the industrial sector, distributors, machinery. If you’re in the no recession camp, industrial financials good spots to start looking.
SEANA SMITH: Michael, why are you in the no recession game? Because I think a lot of strategists are still bracing themselves saying that, hey, we could see a recession over the next 12 to 18 months. So what is it that’s making you so optimistic?
MICHAEL ANTONELLI: We could do a whole show on this. In fact, I may need to blog on that after this. So there’s six things that the NBER looks at to pick a recession. Six things– things like, real personal income and real retail sales and real consumer spending. Of the six– of the six in the past six months, five of them are still positive and growing. Only one is negative. It’s industrial production. Six of them are still growing.
Equifax just put out their consumer delinquency data. They look at all consumer delinquency. The delinquency rate is about 1.8%. That’s one of the lowest in years. Delinquencies have flattened out here. So consumers are just in a great shape. We keep neglecting the fact that a lot of consumers have 3% mortgages. And they have jobs. And they’re still spending. Do they hate inflation? Yes, 100%. But the things that cause a recession just aren’t flashing. And I don’t get– I know the yield curve is inverted. We’ve talked about that for like, 48 months. But the stuff that causes a recession just isn’t flashing.
