More and more, it looks as if the next president will inherit a weak economy at best. I think public pressure would force a President Obama to junk the economic platform of his campaign and "go for growth." It seems that superstar bond manager Bill Gross's idea to create a $500 billion stimulus package could happen, since it's hard to imagine Obama proposing dramatic tax cuts. Nor does Obama probably want to follow Bill Clinton's "bond market strategy" of boosting the economy by cutting the deficit. (Liberals hate that idea because it knocks out all their pent-up spending plans.) Anyway, here is the gloomy economic outlook from the usually bullish economist Michael Darda:
June retail sales failed to live up to consensus expectations, indicating that the bounce from the rebate checks now hitting household mailboxes will be shallow and short-lived. Given the latest "wave" of the credit crisis, business and household caution will almost surely continue to slow growth though yearend, which is undermining payroll employment and income gains. High headline inflation, declining home values, and falling stock prices are pressuring household balance sheets and permeating a high level of economic pessimism.... If there is any good news here, it's that the stock market appears to have priced in a prolonged period of weakness already, meaning there isn't the kind of fluff in valuations or sentiment that characterized the last bear market in equities. Hopefully this means the bulk of the weakness in stock prices is behind us.