Gary Shilling: Investment Climate 'Unhealthy' for Stocks

Stocks continue to post strong gains, but the economic and market backdrop indicate investors could encounter rough seas, economist and investment advisor A. Gary Shilling suggested Monday in his monthly Insight newsletter.

“U.S. stocks have been robust, but this may be the calm before the storm,” Shilling wrote.

“The current investment climate is unhealthy. Economic growth has slowed, stocks are expensive, the Fed is unlikely to cut interest rates in the near term and speculation is still rampant and begging to be slashed,” he said.

The U.S. economy appears stable although inflation sits above the Fed’s 2.0% target, while the central bank appears to be in no hurry to push it down, Shilling noted.

The inverted yield curve and declining leading indicators index point to recession, he said, citing other “worrying” signs, including declining money supply growth, rising continuing unemployment claims, quit rates falling faster than new hires and shrinking job openings.