There is still a long way to go before the United States has a full economic recovery and it is therefore wise for investors to be cautious, not make any bold predictions about what will happen with the economy for now, and maintain balanced portfolios, according to JPMorgan strategists.

“Technically, the recession is actually over” because there was improvement in the economy after April, but “the struggle to recover” remains, David Kelly, the firm’s chief global strategist, told reporters Thursday during a third-quarter “Guide to the Markets” call. And he predicted the recovery will be a slow one.

“We have seen some positive news recently,” he said, pointing to Thursday’s jobs report, which showed 4.8 million jobs added in June and a drop in the unemployment rate to 11.1%.

However, that is still a huge unemployment rate and “we have to be honest and realistic about where we are,” he said.

He compared the current situation to when he used to drive to New York from Massachusetts. It’s only about a four-hour drive in theory, but it always takes longer, he noted. That is because you’ll be “speeding along the highway, but you always know by the time you get to Bridgeport, Connecticut,” you hit traffic, so you try to avoid the traffic by taking the side roads, he recalled, adding: “Eventually you do get there — it’s just much slower going.”

There is talk about a V-shaped recovery, he noted. But he warned: “Be very careful in how you think about that because the first part of it is a V … because a lot of companies that shut down in April were able to reopen [and] get back to business in May and June, and we’re seeing that in the data,” he said.

“But the rest of it, I think, we unfortunately get diversion off the side road” as the virus continues to spread, and “progress from here will be slower,” he predicted.

The risk for investors is that “they buy too much into the idea of a full V-shaped recovery in the economy and don’t recognize” that we are “entering the back roads of the economy and they’re slower and they’re bumpier,” he said. “You need to position a portfolio … recognizing we’re eventually going to get there — we will eventually have a vaccine and we’ll get past all this — but do recognize there’s also going to be a slower going from here.”

Pointing to the recent surge in confirmed U.S. virus cases, he predicted infections would continue to rise, but added: “It’s not all new bad news.” For one thing, the pace of fatalities has declined, although it is “still frighteningly high,” he said.

Kelly also predicts there will be another government stimulus — of $1 trillion or more — this summer, probably in August. That will help support the economy with continued job gains through the first quarter of next year, he projected.

“If we do this, then I think we’ll be able to avoid a double-dip recession,” he said, but he warned: “If we don’t do that, then the economy could well fall back into recession” with more layoffs later this year.

Portfolio Building

JPMorgan Global Market Strategist David Lebovitz went on to tell reporters he was “relatively neutral on stocks versus bonds, adding: “We are somewhat measured in terms of how we’re thinking about building portfolios” at this time.

“There’s really no substitute for Treasurys and other forms of high-quality fixed income when it comes to offsetting equity market volatility,” he noted. “When we think about building fixed income portfolios … we’re still comfortable holding Treasurys as a hedge despite the fact that they’re not really generating any sort of meaningful income at the end of the day,” he said.

However, “in an uncertain world what investors need to do — particularly in an uncertain world where interest rates are historically low — is … expand and change the way that they think about portfolio construction and diversification,” he suggested.

What that means, he explained, is “embracing less traditional equity and fixed income strategies, thinking about things like option overlays on your portfolio and also maybe looking in parts where you haven’t looked all that much before.” That includes “core real assets and, specifically, direct real estate and unlisted infrastructure are really interesting ways of generating income in your portfolio without materially adding to your overall volatility.”

A balanced portfolio is important and it is best to not try to make investments based on what you think might happen with the economy and markets over the next year, he said.

He cautioned: “When you take the back roads, there are lots of twists and turns and the bottom line is that that makes it very difficult to see what is ahead, and speeding on a back road … will get you into trouble.”