A recession is not imminent, says manager.

Recession warnings are all the rage right now. But here is an opinion that is a counterpoint to all the recent doom-and-gloom recession prophecies.

Esty Dwek, Head of Global Market Strategy, Dynamic Solutions, Natixis Investment Managers, says one isn’t coming.

May not be time to add too much risk, but don’t take it all off either

According to Ms. Dwek, investors may have unnecessarily panicked given the developments this month around the US-China trade war and yield inversions.

She cites the following factors in support of her opinion that a recession is not, as generally believed, around the corner.

• With some exceptions such as Germany, growth trends remain broadly intact
• Though manufacturing is weak, services are taking up the slack
• Chinese retail sales are likely going to stabilize
• US housing will benefit from lower interest rates
• Trump’s action to exempt certain products from punitive tariffs up to 15th of December looks like a temporary truce
• In the ultimate analysis, Trump will weigh his actions on the trade war keeping in mind this is his re-election year, and to therefore not rock the US economy boat too much
• Renminbi, the Chinese currency, has stabilized after its recent depreciation
• A no-deal Brexit is low in probability
• As for the Fed, a rate cut appears certain in September. It is likely to maintain a dovish stance over the near-term
• Lagarde is expected to carry forward the easing position of the European Central Bank
• Dovish central banks around the world will be supportive for equity markets
• Better growth and better earnings will bolster US stocks
• The alarming fall in sovereign yields has created an overly negative outlook
• Regardless of the US yield curve inversion, data does not support an imminent recession
• Lower yields are likelier due to dovish expectations and the chase to lock in yields

The fasten seatbelts sign and recession warnings

Nevertheless, Ms. Dwek warns of higher volatility and short-term corrections amidst ongoing uncertainty and market sensitivity to headlines. Also, expect more significant intraday moves given the risky political and geopolitical environment.

Investment tip: Amidst the uncertain outlook on returns from traditional asset classes, investors could consider diversifying into liquid alternatives and other alternative assets.