Well, for all the recession naysayers out there, and anyone else who may be interested, here is some interesting information for you. The actual data that is used to date the beginning and end of recessions; broad sales growth, industrial production growth, and personal income growth, have not only been falling, they are at 22 month lows. This is not forecasted data. This is already reported data. Furthermore, over the last fifty-plus years, when a decline of these economic data points has occured in this same manner, a recession has followed 100% of the time.
But I know, you're thinking "Wait a second Henry, look at the jobs numbers and look at the stock market...they're both going up!" Jobs are a lagging data point. Historically, jobs growth follows consumer spending growth. Hmm, consumer spending growth has been trending down (not surprising given the declining income mentioned before). In the '74-'75 recession, jobs didn't begin to fall until several months into the recession.
As for the stock market, many of the world's central banks have been on a money printing binge. Since the use of money, which is called velocity, is rapidly slowing by consumers and businesses (and is actually, by some measures, at record lows), this money tends to flow to "risk assets", thus the rise in stocks. The problem is it also flows to commodities; hence the rise in oil prices (part of this is due to tensions in the Middle East, but I would argue all day long it is mostly attributable to printed money, and thus, a weaker US dollar). This is part of the reason why I think quantitative easing, "printing money", is a terrible idea. Our blessed Federal Reserve as well as most other central bankers in the world (with exceptions in Switzerland and a few other places), tend to equate either rising risk assets or INFLATION, as being economic growth (this is, by and large, a Keynesian concept). THIS ASSUMPTION IS NOT TRUE. For the average American consumer, rising stock prices has little effect on their overall economic wellbeing. Rising gas prices has a huge effect on their overall economic wellbeing, and it is strongly negative.
And lastly, can stocks continue to go up if the Fed keeps printing? Well, the 25% increase in oil prices over the last six months will likely keep a lid on further printing for the time being, as it is hard to deny, even for anachronistic central bankers, the damaging effect this has on consumers. But let's say they do keep printing; well, in this case, let us examine the history of Japan, who, during the 1990's went on a MASSIVE money printing binge, with the same intention as our Fed; trying to "reinflate" the economy. The following chart of the Japanese stock market shows how well money printing worked. In fact, about mid-2006 the Japanese central bank largely concluded that it's quantitative easing policy was not effective.
Suffice it to say, I am very wary of "risk assets" at this point. If anyone has questions or wants to debate or discuss this more, I welcome it.