Top strategist David Roche has warned of a recession and said he would own stocks in just some specific sectors. Roche, president of consultancy Independent Strategy, warned the economy is entering a "war-cession," and said markets are underestimating it. "In a normal recession, output and demand go down, inflation goes down. In this sort of a recession, a 'war-cession,' you actually have output which falls at the same time as costs and inflation rise," he told CNBC's "Squawk Box Europe" on Friday. Asked what he would advise owning or not owning, Roche stated: "What you don't want to own are stocks based on hope. You want to own stocks which are based on earnings and dividends and business models which you can understand." He said he would "stay pretty well out of Europe," due to the conflict in Ukraine, which he suggested could be long and costly, and he warned of a "very high" risk of recession in the region. "The U.S. requires a safe haven, but I wouldn't be overjoyed about stocks at these multiples. Bonds have still got a lot to lose, because the interest rates are still going to move higher," Roche added. The U.S. Federal Reserve approved its first interest rate hike in three years last month – bond prices generally fall when rates rise. "And when you come to what you want to own, well, I'll give you a pretty short list. I would own everything to do with commodities. I would still own everything to do with energy, I would own gold … the majority of my portfolio would be as close to those assets as I can get," Roche said. — CNBC's Elliot Smith contributed to this report.
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Top strategist David Roche has warned of a recession and said he would own stocks in just some specific sectors.