April 2024

In Section I, we acknowledge that investors may wish to be neutrally positioned toward risky assets even over a 6-12 month time horizon. Our confidence in an eventual recessionary outcome has not changed, but a recession may be delayed by a Fed-driven easing in financial conditions. We are not prepared to change our investment recommendations today, but strong evidence of sustained growth and continued disinflation could lead us to recommend increasing exposure to risky assets for the sake of portfolio risk management. In Section II, we ask whether growth stocks will outperform value stocks during the next US recession. We examine historical performance of style during recessions dating back to 1926, and conclude that growth stocks are likely to underperform value during the next US recession. That assessment will change if growth stocks sell off significantly in advance of a contraction in output, or we see signs of significant sector-specific effects impacting value indexes.