Buy these 7 value stocks to help your portfolio thrive during ‘economic purgatory,’ according to the manager of a $17 billion fund

• It’s still unclear whether there will be a recession — and how serious it would be.
• John Linehan of T. Rowe Price sees the US staying in “economic purgatory” this year.
• Detailed below are seven top stocks to buy now, according to the $17.5 billion value fund manager.

Despite continued strength in the labor market, many investors are still expecting a overall economic downturn to strike the US sometime in the next year.

The silver lining is that most Wall Street firms think the economy will experience a soft landing, which would be characterized by a mild downturn.

John Linehan, the chief investment officer for equities at T. Rowe Price — where he manages a nearly $18 billion fund — is staying out of the hard-or-soft-landing debate entirely. His hunch instead is that there won’t be a landing at all in the near future.

But that “no landing” scenario that Linehan envisions is different from the buzzy new phrase that some market commentators have recently adopted. Instead of defining that term as perpetual growth without any slowdown, Linehan said he sees the economy ending up in what he calls a “messy middle.”

Under this scenario, without clarity around a firm economic outcome one way or the other, market participants will find it difficult to make high-conviction investing decisions.

“No landing, to me, is economic purgatory,” Linehan told Insider. “And my sense is that’s kind of where we are right now and — absent a change in policy — probably where we’re going to stay for some period of time.”

7 stocks to buy in a cloudy economic landscape

Linehan, who is the portfolio manager for the $17.5 billion T. Rowe Price Equity Income Fund (PRFDX), believes the best way to prepare for this uncertain economic climate is to split the difference between the two scenarios. This means buying value stocks that will both succeed amid a soft landing, as well as those poised to benefit from the more extreme event of a full-blown recession.

“What I’m trying to do in my portfolio is not get overly tilted one way or the other, get overly dogmatic, but try and take advantage of opportunities,” Linehan said.

If the US avoids a recession, banks would be well set up for long-term gains, Linehan said. He noted that unlike in 2008, financial institutions are more transparent and have safeguards in place like higher capital requirements, which makes them much less risky. Overall, he sees the group as attractively valued, especially in a soft landing scenario.

But outside of financials, Linehan said he isn’t head over heels for any sectors.

“We are finding it difficult to find really big themes right now,” Linehan said. “I think most of the intrigue that we see is more idiosyncratic in nature where there are names that we think are really well-valued, are very intriguingly valued relative to their set of fundamentals.”

Below are seven of Linehan’s favorite value stocks to own in this environment along with the ticker, market capitalization, sector, and thesis for each. The first four names are in cyclical sectors and the last three have a more defensive tilt.