- "The economy is defying gravity" after third-quarter GDP approached 5%, according to JPMorgan portfolio manager Phil Camporeale.
- Camporeale said that the three tell-tale signs of a recession are nowhere to be found.
- If no recession materializes, as Camporeale expects, then investors should buy high-yield bonds.
The recession everyone's been waiting for over the past 18 months isn't coming anytime soon after the release of third-quarter GDP data, according to JPMorgan portfolio manager Phil Camporeale.
The US economy posted third-quarter GDP growth of 4.9%, representing its strongest quarterly growth since late 2021, and that's after multiple quarters of above-trend growth.
At that pace, the economy isn't signaling a moderation to a soft landing, he said, suggesting no slowdown at all.
"The economy is defying gravity right now, and it's the gravity of this interest rate cycle that nobody saw coming," Camporeale told CNBC on Thursday.
With a recession potentially averted, as he expects, investors should be buying high-yield bonds that are returning upwards of 9%.
"We really like US high yield [bonds]. US high yield is a no-recession trade. A soft landing is no recession. It's also higher for longer, and a high-yield instrument yielding 9% is really attractive," Camporeale said.
To gauge whether the economy is going to enter a recession anytime soon, he said investors need to monitor three big things: GDP, the jobs market, and inflation.
And right now, on all three fronts, it doesn't look like a recession is imminent.
On GDP, Camporeale highlighted that near-5% growth is exceptionally strong, and that most importantly, it's the labor market that has been standing tall amid the scary headlines of an imminent recession.
"The labor market [is] the canary in the coal mine. That's what matters the most here," he said.
The labor market has been rock solid in recent months, with an average of 266,000 jobs being added to the economy each month over the past three months. Additionally, there are 1.5 job openings for every unemployed person looking for work, and weekly initial jobless claims continue to hover around 200,000, which is exceptionally low.
Finally, recent inflation readings show continued progress in the Federal Reserve reaching its goal of about 2%.
Ultimately, that means that the Fed has more risk being dovish than being hawkish, as they "can't allow inflation to reaccelerate," Camporeale said.
With that in mind, he said he expects every Fed meeting to be "live" in terms of changing interest rates, and that the two options going forward are that interest rates are either higher for longer, or even higher for longer. And in either of those scenarios, high-yield bonds should do OK, according to Camporeale.