3 safe stocks to invest in for a 'cooling, not cratering' economy, according to $200 billion Huntington Bank

The economy isn't in recession, but expect more volatility, according to Huntington Private Bank's Chad Oviatt. 3 safe stocks to purchase now.

• Don't be scared by last week's jobs report — GDP growth remains strong, Chad Oviatt says.
• However, investors should buckle up for increased volatility as the market broadens, he warns.
• Oviatt is the director of investment management at Huntington Private Bank.

While some Wall Street bears are heralding a recession after Monday's market plunge, other strategists aren't so worried.

Chad Oviatt, the director of investment management at Huntington Private Bank, doesn't think investors should catastrophize the events of the last week.

"If you believed and had high conviction in Monday's actions, you basically are saying the US economy is heading to recession, and we're heading for a bear market," Oviatt said. "We don't think the case is there for either one of those."

The stock market might be slowing down from the explosive growth it exhibited earlier this year, but Oviatt sees this as a "cooling, not cratering" of the US economy. Expect to see some choppiness as the S&P 500 broadens out beyond the Magnificent Seven, but don't be spooked by short-term volatility — the underlying fundamentals of a strong economy are still intact, he said.

In an interview with Business Insider, Oviatt shared why he believes recession fears are unfounded, as well as three trades that can boost investors' portfolios during this period of instability.

3 indicators of a strong economy

Last week's jobs report and ISM manufacturing index triggered massive panic in markets, but Oviatt pointed out a plethora of positive indicators of economic strength.

Second-quarter GDP data showed that the US economy grew at a rate of 2.8%, a marked improvement from 1.4% in the first quarter. And although last week's ISM Manufacturing PMI was disappointing, the ISM Services PMI beat analyst expectations earlier this week when it registered at 51.4, up from 48.8 previously. When it comes to gauging the health of the economy, Oviatt believes services is more telling than manufacturing, considering that the US economy is predominantly service-oriented.

Additionally, even though investors may have been disappointed by Big Tech earnings, US companies are posting strong earnings numbers. In fact, they're beating expectations.

"Coming into earnings season for Q2, the consensus was 8%, 8.3%," Oviatt said. "We're actually running north of a 12% earnings growth rate right now for Q2."

In Oviatt's view, this earnings outperformance signals that US companies are financially healthy and will continue growing for the rest of 2024 and into 2025. Combining strong GDP growth and earnings growth creates a very solid foundation for the US economy, which is why Oviatt isn't concerned about a recession.

3 investments to make while the market readjusts

The process of rotating out of Big Tech won't be without bumps, and investors should prepare for more volatility in the coming weeks, Oviatt said.

The best investments to make right now are in stable, high-quality businesses, he said. Specifically, Oviatt likes dividend stocks for their income enhancement and tax benefits. Companies with strong cash flow generation can reward their shareholders by paying out dividends, which Oviatt sees as an indicator of a healthy business with a robust balance sheet. Oviatt highlights the below investments for their history of paying dividends and adaptability to trends in the markets.

American utility and power production company AES Corp (AES) is one example. Oviatt is bullish on the utilities sector overall, but he sees AES as a standout company because of its green energy transition. The company has a goal to fully exit from coal by the end of 2025 and triple its renewable energy capacity by 2027.

For those who aren't pleased with the Magnificent Seven's recent performance but are still bullish on AI, AES provides more indirect exposure to the investment trend. Oviatt points out that AES has many overlapping markets with data centers, which are notorious for their high energy demands. AES has a dividend yield of 3.48%.

Sherwin Williams (SHW) is another solid investment. Oviatt likes the paint manufacturing company because of its solid business model and secular tailwinds. The company has a broad customer base, servicing both individual home renovators looking for DIY projects and the professional building market.

Additionally, Sherwin Williams is getting a boost from the locked-up real estate market. Housing supply is low, and existing homeowners aren't selling because mortgage rates are high.

Because of that, existing homebuyers are itching for home upgrades. "The longer you stay in a home, the more and more your dining room screams for a new color," Oviatt joked.

Even as interest rates come down, homebuyers will still be driving demand for paint as they upgrade their homes from generic builder-grade colors and repaint. "It's one the first spends on a home," Oviatt said.

Sherwin Williams has a dividend yield of 0.78%

Lastly, Oviatt recommends the blue-chip classic Coca-Cola (KO) for balancing risk in a portfolio. The company has a broad array of products in the beverage market and a global footprint, which makes the business an attractive and stable investment.

Oviatt believes that Coca-Cola is well-positioned to weather economic bumpiness. Recent economic data shows that the US service industry remains robust. Given its role as a prominent restaurant supplier, Coca-Cola is closely correlated with this area of the economy and should continue to perform strongly going forward. Coca-Cola has a dividend yield of 3.12%.