Newsmax Finance Insider Ed Yardeni doesn’t expect a recession and is optimistic long-term, but he expects 2016 to be “choppy and difficult.”
"I admit the risks of recession are increasing, but I’m not looking for multiples to dive into the single digits, which they do in recessions," he told Barron's.
"I remain fundamentally optimistic. Last year was choppy and difficult; this year will be choppy and difficult. But the U.S. will come out of this in particularly good stead," he said.
He said although the U.S. stock market has been unstable this year, America, as they say, is still the best house in a lousy neighborhood.
"We have a more resilient and more diversified economy than others. Clearly, the manufacturing data lately look like recession, and a lot of that is related to energy—30% of the S&P 500’s capital spending is attributable to energy companies, which are slashing spending," he explained.
"But, excluding energy, profits are still growing. The consumer is still growing, but at a slower pace. A lot of jobs are being created in the services economy," he said.
As far as the Federal Reserve, they too have been more a part of the problem than an ingredient to the solution.
"The Fed terminated QE in October 2014, and the chatter immediately turned to when they would begin raising rates, which they did in December. You’d think, one measly 25-basis-point [0.25%] increase, what’s the big deal? But they also predicted four rate hikes this year. They got cocky, thinking the economy was on a solid footing," he said.
"At the end of the day, the most important tool central banks have is credibility, and they will continue what they’ve been doing. If you bail out of stocks, your risk is that some major central bank somewhere will do something that makes stocks rally for a while," he said.
As far as where investors might consider placing their bets, he suggests health-care stocks. And the entire industry: hospitals, pharma, devices and biotech.
"I am talking across the board. The demographics for health care are so extraordinarily bullish. Health care is one of the most backward sectors in terms of using technology, and that’s changing rapidly. They are increasing productivity across the board," he said.
"The consumer will benefit from the weakness in commodity prices, the continuing shift from manufacturing to services, and, increasingly, to the very rapidly growing knowledge economy. So anything related to consumer entertainment services—movies, theme parks, hotels, resorts—are all going to be profitable, with good growth prospects."
Yardeni isn't the only optimist despite the market's recent plunge.
Stock market bull Tom Lee said he doesn’t expect a recession, but investors might experience the same financial pain as if there was one.
"Corrections and bear markets have the same feel, which is buying doesn't feel right. Selling feels good," he told CNBC.
"The market have been terrible. But that doesn't mean this is how markets are going to behave two [or] three months from now," he said. "There are lots of reasons to expect markets to start to perform better," he said.
Lee also doesn't see many other signs of an extended economic downturn. "One of the messages from earnings this season has been, companies don't see the same type of destruction that markets are feeling," Lee said, though he conceded that "investors are doubting what companies are saying."
(Newsmax wire services contributed to this report).
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