Yet investors need to pay attention. “The alarm is when the yield curve inverts,” he said. “It’s a predictor of both recessions and returns in the market.”
Actively monitoring economic data and what it presages is a smart strategy.
Pick Recession-Resistant Stocks
Most analysts believe that Mr. Trump is bluffing on tariffs and that they are being used as a negotiating tool. This comes from the school of thought that favors what the president does over what he says.
For instance, after saying so many harsh things about European trading partners, Mr. Trump embraced Jean-Claude Juncker, president of the European Commission, just last week.
“The worst case is, Trump just gets in a fight with China, Europe and everyone else and we see an escalation of tariffs that slows world trade and has a significant impact on the U.S. economic cycle, increases inflationary pressures and ultimately reduces output,” said John S. Osterweis, chairman and chief investment officer of Osterweis Capital Management, which manages about $7 billion.
That would be crushing, but it is not the only possible outcome.
“The flip side is, Trump really is a master negotiator and what he’s doing is trying to move away from multilateral trade agreements to bilateral agreements,” Mr. Osterweis said. That may produce better trade deals, he said.
Lacking any idea as to which outcome to expect, Mr. Osterweis has been encouraging clients to invest in companies whose outlooks are less dependent on the economy or a particular industry, he said.
“You could think of a Google, where people’s search habits aren’t going to change dramatically if there’s a recession and there’s already an inexorable migration of ad dollars to that company,” he said. “You could look at a drug company with a blockbuster drug coming through the pipeline or a Disney, where they have the next unbelievably popular movie coming out.”