Some cracks are appearing in our economy.  Orders for durable goods, especially of core capital goods, have slowed more than expected.  Industrial production has slowed for two straight months.  The Philly Fed Index has dropped into correction territory.  While there is no cause for alarm, there is some cause for concern.

Three years ago, in the first quarter, the economy showed signs of weakness, and the stock market quickly over-reacted, frightening many investors.  This time, despite signs of weakness, the stock market continues to propel itself upward.  This divergence is difficult to understand.  The probability is that the signs of economic weakness are false and misleading, like they were three years ago.

I remain more comfortable with the economy than with the stock market and see no recession in the near term.  Clearly, neither does the stock market!