Liz Ann Sonders: 9 Reasons Why the U.S. Economy Won't Suffer a 'Double Dip'


The U.S. economy is experiencing "a slowdown, not a meltdown" and won't suffer a ‘double-dip' recession, according to Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. The negatives facing the economy are well known, including high unemployment, housing rolling over, China slowing, Europe imploding, uncertainty over U.S. policy and higher taxes in 2011, runaway government deficits worldwide and the end of global stimulus.

Sonders doesn't dismiss these (and other) factors and admits "the end of the ‘V'-part [of the recovery] happened a little more abruptly than we'd anticipated."

But in a report this week on Schwab's Web site she lists a number of positive trends that aren't getting enough attention and suggest GDP will remain in positive territory, even if growth is muted:

-- Leading economic indicators from the OECD and Conference Board show little or no risk of near-term recession. (And while the ECRI's weekly leading index has tumbled in recent weeks, it hasn't triggered a recession yet, ECRI managing director Lakshman Achuthan said during a recent appearance on Tech Ticker.)
-- Ned Davis Research's "recession probability model" remains near 0%, and the firm's "financial stimulus index" also indicates little risk of recession this year; in fact, NDR's latter index is at levels consistent with solid economic growth.
-- Unemployment claims have likely resumed their decline. (Even at their current level they suggest 2.5% real GDP in the third quarter.)
-- The Business Roundtable CEO survey of employment plans is at its highest reading since 2006.
-- Corporate profits are booming and corporate cash is at a record $1.8 trillion.
-- The rate of contraction of bank lending to commercial and industrial companies is slowing noticeably.
-- Durable good orders, though down in May, are in a strong rising trend and up nearly 20% from their recession low.
-- Economic readings in emerging economies remain very healthy.
-- The Fed is on hold for the foreseeable future and could reinstate quantitative easing were the recovery to falter further.
Of course, the bears can cite a litany of other metrics to make their case for a double dip (or worse). Still, it's worth noting that Sonders called the start of the recession in late 2007 and its end in June 2009; both calls went against the grain of prevailing conventional wisdom at the time and (surprise surprise), both proved prescient.

If Vinny Catalano is right about the dire consequence of another downturn, here's hoping Sonders is right again.*