There is little doubt the US economy is slowing down. Will it slide into recession? Possibly yes, but not immediately.

The fact that the yield on the 10-year note has risen decisively above 3% is a sign of tough times ahead for the US economy. At 3.05% the 10-year yield is at its highest in four years. The spread between the 10-year and the 2-year yield is 0.49. The cost of money will undoubtedly rise considerably higher in the months ahead, partly because of the huge tax cuts just introduced by the Trump administration, which means higher demand for cash from the US government. The higher yields have also contributed to the dollar’s sharp increase against the yen and the Euro, which should become a problem for American exports.

Also important, the Fed is likely to hike its base rate as advertised, probably three times in the current cycle. Overseas, the ECB is getting closer to ending its monthly injection of money into the system by the end of summer. The result is a divergence in interest rates, which should push the dollar further up. The economic consequences are quite clear, slower growth.

On the political front various developments are bearing down on the economy. The widening split between the Europeans and the US cannot turn out well. German Chancellor Merkel reportedly hates Trump. President Trump’s fawning over French President Macron is a show that will yield noting positive. On the domestic front, the inquiries into Trump’s actions are not yet far enough along to determine whether Trump’s presidency is in jeopardy. If everything does go into the tank, we should get quite a walloping in the stock market and in terms of economic growth.