Resist the urge to buy the dip in stocks because recession risk is still being ignored, research firm says
From Yahoo Finance: 2025-04-16 22:34:00
Macro strategist Daniel von Ahlen warns against buying stocks, citing the risk of recession due to tariffs and spending cuts. He advises focusing on defensive sectors and inflation-protected Treasurys. The S&P 500 is down 13% from its peak, and investors are underpricing the risk of a recession, von Ahlen says.
Von Ahlen expresses concerns about federal spending cuts negatively impacting the labor market and corporate profits. He also highlights the uncertainty surrounding Trump’s economic policies affecting investment spending and hiring intentions. The crackdown on immigration could lead to a decline in US labor force growth, potentially pushing the economy into a recession.
The stock market’s volatility could pose a problem for the economy due to the wealth effect. Rising asset values typically boost consumer confidence, but plunging stock markets dampen animal spirits. Interactive Brokers clients continue to buy amid volatility, with Nvidia being a popular choice. Investors may not change behavior until a deep and prolonged stock market drawdown occurs.
Von Ahlen suggests investors be more selective in their purchases, recommending defensive sectors like utilities, consumer staples, and healthcare stocks. He also advises watching for a rebound in inflation and purchasing long-duration inflation-protected Treasurys. Investors should be cautious amid the current economic uncertainties.