With the first quarter in the rearview mirror and earnings season underway, Scott Davis, lead portfolio manager for the J.P. Morgan U.S. equity strategy, said he’s seeing and hearing enough good news to offset any rumblings of bad news.

“We're not feeling like a deer stuck in the headlights. There’s a lot of great cyclicals that are on sale, a lot of great growth companies, value companies,” he said today in a market outlook webcast. “You can bring it together in one, not be frozen, because I don't think there's need to be. It’s just a little tricky in the short term, but long term, it's really a glass half full.”

Davis, whose investment style is described as “high conviction with a style-agnostic approach,” thanked his research team for his keep-calm-and-carry-on perspective, as he said those boots on the ground host more than 5,000 meetings a year with company management.

“If I was the 10,937th person trying to analyze every word the Fed says, that’s not insightful. It's just what everyone else is doing. So those thousands of meetings that our team has with companies are so important because if you want to figure out how much unemployment is going to rise, yeah, you can analyze the yield curve and dissect the minute meetings, but it’s a lot more effective to talk to the decision-maker, the CEOs, and see what they're hearing,” he said.

As it stands, Davis said he’s not hearing much. Yes, he’s hearing about slight declines, but that’s on top of spectacular growth, and the important thing is whether the U.S. economy is just in the trough of a healthy business cycle or careening off a cliff.

He says the vast majority of the companies, the ones most responsible for the workforce, say that a 5% to 10% drop has to be put in perspective because of the previous market growth. Even with a decline, he says, some of them might be claiming to have their second-best year ever. “Even if I'm down 5% or 10%, what do you want me to do? Fire all these people? Do you want to mothball some important project? No.”

Davis said these declines, when put in context, still show economic health, and that while there are always headlines and headwinds that need to be addressed—as well as a banking blip that has tightened lending—all signs are that the economy has remained healthy.

“Based on the great research and connections and resources and access that our team [has], I think I’m describing a recession that is pretty mild, pretty short. And therefore, the question is: What do you do with it?” he said.

Where Davis said he sees opportunities starts with the agnostic part of his approach, where he’s not trying to be a macro or style strategist but instead looks to take on enough risk to hit his goal of 200 basis points of alpha, and with a tracking error of about 2.5%.

“How do you do that? With stock selection,” he said. “If you have 10 names or 20 names, you might not have enough diversification. It’s not such a small secret that the opposite is also true. If you have 100 names, 200 names, the more you look like the S&P, the more you’re taking on the risk of the S&P.”

Some of the large tech stocks are still very attractive growth opportunities, he said, but it’s important not to buy them all.

“Microsoft sounds like a cop-out because it's so big in the S&P, but if it's the best thing in software right now, it's one of the largest overweights. But let's be selective among the household names,” Davis said. “Of the top 10, we own six, we don't own four. Even of the six that we own, two of them are underweights. So you’d better distinguish.”

And his favorite picks are the ones that aren’t household names but that are key to many industries, like NXP, a chipmaker for electric vehicles.

“So yes, we can add value with Tesla and we have. That's great. But we have a lot more conviction in NXP trading at a low-teens multiple at normal earnings. Boy, what a great opportunity,” he said. “And then at the same time, what about all the charging stations and infrastructure that's needed for everyone who provides electric vehicles? Finding the winners of tomorrow as well as distinguishing amongst those household names so you're getting better than passive and better risk control is what we're trying to do every day.”

Davis said he sees lots of opportunity in large cap, whether it’s growth or value. And when it comes to sectors, he even sees opportunity in banking.

He said that because of great underwriting and research, his team wasn’t exposed to the current poster children of the banking crisis (think Silicon Valley Bank). “But why were we overweight banks? We were. A lot of Morgan Stanley, Truist, and some Wells Fargo,” he said. “Our job is to be a risk manager and be active and think about how to take advantage of opportunities. So we're still overweight Truist and U.S. Bancorp. But look at Wells Fargo, there's something interesting there.”

He said Wells Fargo’s valuation has remained attractive because it’s still being highly regulated as a global systemically important bank and has had higher liquidity requirements than other banks.

“Take advantage of Wells Fargo, which is on sale. Right now, Wells Fargo has an asset cap because of mistakes going back five-plus years,” he said. “We need companies out there writing loans. You don't want to restrict lending capacity at a time like this. So you don’t need to flee.”