Deutsche Bank Clients Are Worried The U.S. Is On The Edge Of A Recession

Deutsche Bank’s clients see plenty of reasons why the U.S. could be on the brink of an economic recession. Analyst Torsten Slok recently listed the 10 biggest U.S. economic concerns among clients:

• 1. Late cycle signals from credit markets
• 2. Slowdown in corporate earnings
• 3. All-time high profit margins
• 4. China, including Chinese forex policy, NPLs on Chinese bank balance sheets and too much leverage
• 5. Banks’ lacking the ability and/or willingness to lend
• 6. Downside to oil prices and more weakness in the energy sector
• 7. Inventory correction
• 8. The U.S. economy’s inability to handle higher interest rates
• 9. Too much debt
• 10. Lack of ammunition for the Fed and other central banks

Although Slok agrees that many of these concerns are legitimate, he also notes it’s important to distinguish between fear and true risk.

“Looking at each of the risks, the question is if they are new or have been around for a long time or if some of the risks aren’t simply fears of something that has not happened and may not happen in the future,” he explains.

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He concludes the next U.S. recession will likely not be driven by the same mechanisms that drove the Great Recession, namely a crisis in the financial sector.

So far this year, the U.S. economy is doing just fine and the SPDR S&P 500 ETF Trust (NYSE: SPY) is up 0.8 percent.

Disclosure: the author holds no position in the stocks mentioned.