U.S. economic expansion is getting long in the tooth. After a decade of consistent growth the economy has to cool eventually. The government has been good at manipulating the economy’s vital signs to give the illusion of growth. Investors are now on a manhunt to find signs that the economy is as strong as President Trump says it is or if we are headed for recession.

A few barometers of the country’s economic strength are growth in corporate earnings and growth in personal consumption expenditures (“PCE”). Corporations could still be coming down from a sugar high created by panic buying of commodities and other products in advance of a trade war. PCE growth continues to undershoot the 2% bogey set by the Fed:

Growth in personal consumption expenditures, excluding food and energy (“PCE”), is a metric the Fed uses to measure inflation. The target range is 2%. Since the Financial Crisis, PCE growth has consistently been below the Fed’s target, despite trillions in money-printing. PCE growth for January, February and March of this year was 1.8%, 1.7% and 1.6%, respectively. This implies the economy is cooling. In the past, Powell’s rate hikes have been preemptive in order to beat back inflation. However, if he is to remain data-dependent like he has alluded to then it could warrant a pause on future rate hikes.

Despite the continued melt up in financial markets and mixed data on the economy’s vital signs, I believe we are in the throes of another recession. Read more:

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