“It’s really uncommon to have a recession without all four of these [categories] pretty much falling apart,” he noted. “Today, the consumer is four for four in green signals, which is the backbone of the economy that’s keeping things together.”

That said, the fact that the chart’s overall signal is yellow means the economy “could go either way,” he said. “For the bear case, it’s hard to know what exactly will push us over the edge. But I think the economy is in a more fragile state than most people believe.”

His rationale is that while profits are booming at S&P 500 companies, profits have basically been flat for the past four or five years among smaller companies that employ the majority of American workers. He said that’s resulting in reduced workers’ hours.

“And if pressure builds at some point that will spill over and they’ll have to start firing workers, which could put us into a classic recessionary death spiral, and indicators would start turning red,” Jamner explained.

He said the bull case is that the Federal Reserve, along with other central banks, are in easing mode regarding interest rates. Last year, the five major central banks—the Fed, European Central Bank, Bank of England, Bank of Japan and the People’s Bank of China—tightened interest rate policy in one way or another. This year is a different story with 75% of global central banks on hold and 25% cutting interest rates.

Jamner said if businesses can take advantage of the Fed pumping more liquidity into the system, and the consumer hangs on, we could slowly work our way out of yellow and into green over the next two or three quarters. Such a scenario, he added, could be good for the financial markets.

“We believe we’re in the midst of a secular bull market and have been for a while,” he said. “That’s not to say there can’t be sell-offs along the way. But we think the next 10 years can be a pretty compelling time to be invested in equities."

And if things go unexpectedly south, as in way below the Mason-Dixon Line, Jamner posited that ClearBridge’s recession risk dashboard could provide clues that might help financial advisors and their clients avoid some nasty losses.

“This dashboard can be used to make tweaks within an asset allocation,” he said. “When the dashboard turns red, we think that’s a good time to think about de-risking.

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