Traders are betting against American Airlines and Ralph Lauren with a recession still on the table

• Investors are still cautious on some stocks, despite this year's breakneck market rally.
• American Airlines and Ralph Lauren are two of the S&P 500's most-shorted names, according to the Financial Times.

Investors are still steering clear of listed companies that could see their earnings tumble during a recession, a reminder that a much-predicted downturn is still on the table for the US.

While the S&P 500 index is up 19% year-to-date and closed at a 15-month high Tuesday, cyclical stocks – whose profits ebb and flow with the economic cycle – are as unloved by fund managers as they've ever been, per a recent survey by Bank of America.

Meanwhile, American Airlines, Ralph Lauren, two cruise line companies and a swimming-pool maker are among the benchmark gauge's 10 most-shorted companies, according to a recent Financial Times report that cited data from S3 Partners.

Those consumer-linked stocks typically fall during an economic downturn, when people tend to have less money to spend on flights, high-end clothes, and other non-essential items.

While both the S&P 500 and the tech-heavy Nasdaq Composite have soared this year, the majority of those gains have come from a group of Big Tech mega-caps dubbed the "Magnificent Seven" that have benefited from a massive rise in interest in artificial intelligence.

Analysts have also attributed the broader rally to cooling inflation and a resilient jobs market, with the Federal Reserve close to achieving a dream economic scenario where it tames soaring prices without cratering growth.

But traders' big bets against American Airlines, Ralph Lauren, and other cyclical stocks signal the market hasn't abandoned all caution just yet.

This week, Morgan Stanley's bearish top strategist Mike Wilson conceded this week that he'd been wrong to write off equities at the start of 2023 – but warned there could be pain ahead still as falling inflation limits listed companies' ability to prop up their earnings by hiking prices.

Top economist David Rosenberg echoed those sentiments Monday when he said this year's AI-fueled rally had been a "get-rich-quick scheme" that ignores oncoming pain for the US.

The US's Gross Domestic Product is expected to have risen 1% in the second quarter and then fall 0.1% in the three months ending September 30, according to data from the Philadelphia Fed. The technical definition of a recession is when GDP contracts two quarters in a row.