JP Morgan Asset Management warns of recession risks

So, is it a make or break moment for the U.S. economy and financial markets?

“There’s an element of that in the first half of this year,” Mandel said. “Part of it is just going back to the context of global growth decelerating, and U.S. growth, in particular, having a very abrupt deceleration.”

He expects the risks associated with the U.S.-China trade war and Brexit will eventually subside favorably. However, Mandel believes it’s prudent for investors to be careful.

“If we make it through the next three to six months, I think there’s a fair degree of upside risk in addition to that downside risk that we’re seeing today. So, my sense is to be cautious now,” he said. “Once this signal extraction problem between recession and slowdown is resolved, you might actually see things turn up by the middle of this year.”

For now, his strategy is reflecting the current market risks.

“We’re now underweight slightly equities versus bonds in our portfolios,” Mandel said. “We brought cash up from neutral to a slight overweight in our portfolios. You know you have a small return that’s positive there, and again, a hedge for a lot of those late-cycle shocks — including inflation and policy.”