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Worried About a Recession? Listen to These 3 Fund Managers

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In 2019, many financial experts are worried about a new recession.

After an unprecedentedly long economic expansion and several alarming economic indicators, up to 70% of economists are calling for a downturn in the next two years. This past year has witnessed alarming phenomena ranging from inverted yield curves to declining manufacturing output, lending credence to the concern.

While North American GDP and employment numbers are still mostly solid, the consensus is growing that a new recession is right around the corner.

The following three fund managers can give you an idea of what market movers are thinking.

Byron Wien, Blackstone – cautious optimism

Byron Wien is Vice Chairman of Blackstone Private Wealth Solutions. As a wealth management advisor, one of his key duties is helping clients predict the direction of financial markets.

This year, Wien went on the record as saying that he is cautiously optimistic about the markets. Specifically, he said that any coming recession would be more than two years away. “Inflation remains subdued, and the 10-year Treasury yield stays below 3.5%,” he said, adding that “a recession before 2021 seems unlikely.”

Jack Bogle, Vanguard – “a little extra caution”

Taking a more cautious view, Vanguard’s Jack Bogle, who passed away earlier this year, said that he saw alarming trends forming. Noting that he saw “clouds on the horizon,” he advised taking “a little extra caution.”

Ray Dalio, Bridgewater Associates – 40% chance of recession

Ray Dalio is a legendary fund manager who grew Bridgewater Associates from a tiny start-up to the largest hedge fund in the world.

For years, Dalio has been sounding the alarm about a coming recession, with his predictions varying in terms of confidence as new data comes in.

Most recently, in August, he said there was a 40% chance of a recession before the 2020 U.S. election. That’s a fairly high probability, and may suggest that he believes there’s a greater than 50% chance if we zoom out to a two year timeframe.

What to do

As you’ve seen in this article, money managers have mixed opinions on the odds of a recession within the next two years–but many lean toward caution.

In light of this, what should you buy?

One good option would be a utility stock like Fortis Inc (TSX:FTS)(NYSE:FTS). Utilities tend to do well in recessions because their core services (heat and light) are indispensable; people would rather sell their car than go cold.

Fortis in particular has a number of advantages that are worth paying attention to.

Its track record as a dividend stock is unmatched, with a 3.5% yield and 46 consecutive years of dividend increases.

Its business is highly regulated, providing a kind of government sponsored moat.

It is spending big on investments that are set to increase its rate base ($18.3 billion over the next five years to be specific).

Finally, it recently inked an LNG supply contract with China–the first of its kind for a Canadian company.

Over the years, Fortis has out-performed the TSX utilities sub-index thanks to its commitment to delivering shareholder value. Although its debt load is a poinft of concern, it’s one of the best TSX stocks in a recession.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned.

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