I'm less concerned with the recession/no-recession arguments (hey, don't US politics just absolutely fascinate you? Me neither), than with the implications for profits and stockmarket valuations. Three observations:
1. Regardless of headline GDP, once you strip out extremely volatile inventory-flows, there's been essentially no growth in final sales of domestic product now for five quarter. There's just no momentum at all.
2. The massive fiscal stimulus has not yet completely been washed out of the Kalecki profits reckoning. I calculate profits were down 7.4% qoq and 19.4% yoy, mainly thanks to the fiscal deficit moderating. But there's worse - the profits/GDP ratio has fallen to its lowest level since 1Q16 - so there's cyclical as well as one-off structural pressure at work.
3. All of which means the S&P500 remains overvalued on my slow-model basis, which has been essentially on the money for the last 30 years. July's rally will extend that overvaluation. So the vulnerability continues, and rises.
