For the third summer in a row, economic data here in the U.S. has been weakening. The last two times proved to be just a temporary slowdown, as the economy rebounded later in the year. And these economic headfakes were followed by strong rebounds in the stock market too:
But there is cause to be a little more concerned this time around. On top of a bigger-than-expected slowdown in the emerging markets and the ongoing sovereign debt crisis in Europe, this earnings season is shaping up to be the worst since 2009. Additionally, retail sales have fallen for three consecutive months. Not even during the summer slowdowns in 2010 and 2011 did they decline three months in a row:
So is the summer of 2012 finally the precursor to another recession? Or will those calling for another recession be fooled yet again?
I don’t think a full blown recession is right around the corner myself, but I’m not expecting the economy to get much better later in the year like it did in 2010 and 2011. Hence, I’m not expecting a big rally in stocks later this year either.
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