(Bloomberg) - Even as his team dials up the chances of a US recession to 20% from 15%, JPMorgan Asset Management’s David Lebovitz has a sanguine message for clients on Wall Street: Get ready to buy the dip.
A big selloff swept American markets on Monday, pushing tech stocks to their lowest level in two years and spurring a hunt for havens on fears the White House’s fiscal and trade goals will inflict economic pain.
Yet Lebovitz, who is the global strategist at the bank’s multiasset solutions strategy team, has words of comfort for investors: While risk premiums have jumped, the credit market has yet to crack and economic data, at least for now, point to continued expansion.
Recession fears have risen, but as Lebovitz sees it, higher valued — and speculative — assets are bearing the brunt of the market decline. Convinced that the US economy will likely muddle through, the strategist recommends buying US tech and US financials stocks once the S&P 500 falls below the 5,500 mark — around 2% lower than Monday’s close.
“This selloff may well have a little bit further to go, but we’re certainly not running for the hills,” said Lebovitz, who helps shape the allocation priorities of the $3.6 trillion money manager. “The message from the credit market, though, is more that the economy is operating as a going concern, which, again, stands in contrast to what one might glean if they were to just look at the movement in rates or just look at the movement in equities.”
Lebovitz comments come as Wall Street strategists struggle to define a path ahead for risky strategies amid elevated policy uncertainty. This also marks a shift in market expectations, which headed into the year on the notion that President Donald Trump will prove a boon for business due to planned tax cuts and deregulation. JPMorgan Asset expects the S&P 500 to end the year at 6,400 — a 14% upside compared to current levels.
Hard data, such as labor market reports, have not deteriorated as much as survey-based measures, Lebovitz adds, citing a steady jobs report in February, while the latest fourth-quarter earnings season was “pretty solid.”
The Nasdaq 100 suffered its worst day since 2022 on Monday, with the S&P 500 slumping 2.7%. Treasury yields slid while Bitcoin tumbled below $80,000. Meanwhile, about 10 high-grade companies delayed US corporate bond sales amid the weak market.
“We thought that the administration was going lead with trade and immigration — so the more punitive parts of the agenda — before moving on and trading the stick for the carrot,” he said. “It’s a particularly messy market right now.”
In recent weeks, Lebovitz and his team have recommended investors moderate their exposure to equities in favor of high-yield bonds. And within equities, they’ve diversified away from the US — finding opportunities in places like China and Japan — and closed out their underweight positions in Europe.
Just three months into the year, sell-side strategists are already starting to temper their bullish calls for 2025. Forecasters predict the S&P 500 to close the year just above 6,500, based on a survey of estimates compiled by Bloomberg.
Bulls haven’t vanished, though. Count Kiran Ganesh, global head of investment communications at UBS Global Wealth Management, as one of them. While his team is adding to its hedges, it isn’t selling equities.
“It makes sense to position still for upside,” in areas such as artificial intelligence and electrification, Ganesh said in an interview. “We do think that we should still consider that this is an administration that has set itself out with achieving quicker wins and quicker successes.”
Despite concerns that tariffs and government spending cuts will hurt growth in the world’s largest economy, Lebovitz remains largely constructive on the US business cycle.
“The economy doesn’t look like it’s having a Wile E. Coyote moment and is falling off a cliff,” JPMorgan’s Lebovitz said. “But definitely we’re seeing the pace of growth slow.”
By Isabelle Lee
With assistance from Alexandra Semenova
