While the financial forecast buzzword of late seems to be “soft landing”, there’s a growing sentiment that the economy might not be coasting to that gentle touchdown everyone’s hoping for. If you’ve been tuning in to market experts, you might’ve caught JPMorgan’s Marko Kolanovic’s take: caution might be the name of the game for the second half of this year.

Peering through Kolanovic’s financial telescope, the chief global market strategist sees only a 35% probability of that much-anticipated soft landing. Even more eyebrow-raising? He pegs the odds of a recession hitting within the next 12 months at a substantial 65%.

To many, these aren’t just stats—they’re warning bells. Especially when stock valuations seem to be floating higher than the economic climate might justify. The takeaway from Kolanovic? Brace yourself for some equity turbulence as we venture into the year’s latter half.

Backing up this perspective, there’s an emerging pattern in credit defaults. As credit conditions draw tighter, defaults are seeing an uptick. The data paints a telling picture: the combined count of high-yield and loan defaults this year has already outpaced last year’s entirety. And if projections hold, we might be witnessing one of the market’s top three annual default totals.

So, what’s an astute investor to do amidst such uncertain tides?

Kolanovic’s advice resonates with the age-old adage: Defense is the best offense. This translates to easing off stocks, leaning more towards cash, and setting sights on commodities. These precious resources not only factor in the heightened recession risks but are also buoyed by strong fundamentals and technicals.

For those still intrigued by stocks, Kolanovic points to the “pure defensives”. This lineup consists of utilities, healthcare, consumer staples, and telecom sectors. Historical trends have these sectors shining during past Federal Reserve rate hikes. And with the market speculating that the Fed’s latest July rate increase might be the swan song of this cycle (with rate reductions potentially on the 2024 horizon), these sectors seem poised for attention.

Adding some zest to this defensive stance is an intriguing market trend. The stock market, especially the tech sector, is showing the highest concentration in market cap, unlike anything seen in over six decades. As diversification calls, defensive sectors could be the beneficiaries.

All in all, as 2023 progresses, a tactical pivot towards these more defensive plays might be the savvy move. Whether you’re an entrepreneur gauging market conditions or an investor eyeing opportunities, understanding the shifting sands of the economic landscape is key. After all, in the financial world, forewarned is forearmed!