IN THIS ISSUE:

1. Storm Clouds on the Horizon For the US Economy?

2. US Housing Market Has Definitely Weakened This Year

3. Other Factors Suggesting Economic Slowdown Just Ahead

4. Conclusions: I’m Still Optimistic, But the Bears Have a Case

Overview

This year, I have maintained a consistent positive view on the US economy and equity markets, this despite the fact that economies and stock markets have faltered in much of the rest of the world. My view has essentially been that the US economy is strong enough to decouple from the global economy.

Yet as I emphasized last week in this space, more and more forecasters have been turning negative and predicting a recession next year, or at the latest, in 2020. With the latest steep plunge in the stock markets, the bears seem more vindicated than ever. Now they tell us a recession has to be just around the corner.

Yet I continue to believe that the US economy remains on solid ground, and I am not ready to write off the US equity markets as a result of the current correction. I’m not saying we will see new highs in US stocks by the end of this year; in fact, I doubt it.

What I am saying is that the US economy remains strong, corporate earnings will rise again in 2019 (probably not as much as this year) and the bull market in stocks is not over, in my opinion. I could be wrong, of course.

For the benefit of my clients and readers who think I am wrong, I will present the bearish case for the US economy today. Some of the arguments are compelling, I’ll admit. But the arguments on both sides are almost always compelling. So, even though I’m not convinced, here is the bearish argument.