In a similarly positive sign, the US Federal Reserve’s latest ‘dot plot’ indicator of future rate expectations does not suggest an inversion in the Treasury yield curve, signalling recession, until mid-2018.
In addition, he said the Chicago Federal National Financial Conditions Index (NFCI), which measures stress in credit and banking, does not point to any real stress in the financial system.
If the US were to head into a recession in light of the above data, that would be “historically unique”, he said.
“I’m not saying that you can’t have 10-15% corrections,” Dwyer said.
“I’m telling you that you don’t want to sell them, you want to buy them. Unless you are going into a recession in the US, the market bounces back very quickly and makes a push to new highs. That has been proven time and time again.”
For Dwyer, now is a good time to buy back into the initial Trump trade benefactors – cyclical stocks, like the banks, energy firms and materials.
Meanwhile, the FANG trade of buying giant tech stocks such as Facebook, which has taken off again in the first quarter of this year, is something he advises investors to “cut back on”.
“I wouldn’t short them though, you never ever short with a good fundamental backdrop.”
