Don’t anticipate another catastrophic collapse to affirm your recession predictions this year, but rather a slow-moving downturn, says Canaccord Genuity Chief Market Strategist Tony Dwyer. “This is the most talked about recession of all time,” Dwyer told Melissa Lee on CNBC’s ” Fast Money ” this week. He explained that one of the issues he sees among investors is they are waiting for another SVB or Lehman Brothers moment to signal a recession. “How about we just get an old school money contraction?” he asked. The three routes to stockpiling money, according to Dwyer, each come with respective roadblocks. “You can earn it [but] we’re already past peak earnings,” he explained. “You can get it from a bank, and we know they’re not lending after the SVB [collapse] and the regulatory fear lending standards are pretty tight.” Even obtaining cash through investments isn’t as lucrative despite the gains in the S & P 500 this year, Dwyer explained. “You’re still pretty well below where you were from an all-time high,” he said. Despite the benchmark’s 14% gain this year, Dwyer explained that the median stock in the NYSE is only up 3%. And 54% of the S & P 500 is trading 20% below its 52-week high. “We’re in this squiggly environment where a lot of stocks have already come down quite a bit from their peak,” he said. “And they’re sitting there.” How to play it Dwyer says investors should buy short-term U.S. Treasurys because their yields are more attractive when compared to the so-called earnings yield of stocks, which are inverse to P/E ratios. According to FactSet, consensus estimates for S & P 500 earnings per share this year are hovering just under $220, which generates an earnings yield of about 4.75%, based on current prices. “The six-month T-bill is giving you 5.4%,” he said. “So, you have a riskless rate of return that’s at least 42 basis points above the consensus number.” The strategy doesn’t mean going short when markets go negative, Dwyer explained, but rather looking to take advantage of the downside ahead. “You don’t have to bet against it,” he said. “The question is, do you want to bet with it when [you] can’t find the money that’s going to fund the next level of growth.”
