Most major economies are OK. Yes, there are potential issues related to emerging market weakness bleeding into larger, advanced economies. But, as of this writing, we’re still in a slow, grinding growth.

The economy experienced a similar slowdown in the mid-1980s, which did not prove fatal to continued growth. Currently, there are two reasons why the current slowdown will not lead to a recession: the housing market is still improving and consumers not only are in better financial shape but are also (finally) seeing a pick-up in earnings.

The Treasury market sees weak growth over the next 6-12 months.

The IMF lowered its global forecast for 2016 and 2017. While they project growth for the US, EU and Japan, the rest of the world will experience weaker prospects.

The market started the year with quite a bang, selling off to a degree not predicted by any event that occurred at the end of 2015. The ensuing sell-off has not only caused a fair amount of stress among investors, but also analysts who are struggling to explain what exactly is happening. To that end, I will argue we are seeing two events: an unwinding of the major post-recession trades followed by the markets attempting to find “the new trade.” Most importantly, current turmoil is the result of the inability to find new investment thesis.

2016 certainly opened with a bang. It started with a massive sell-off in the Chinese market that sent ripples throughout the world. Oil and other commodities continued to plumb new lows. Treasury yields dropped and volatility increased. The combined impact of these events led to an increase in bearish calls for the US economy, which is bolstered by the drop in the Atlanta Fed’s GDP Now and Moody’s High Frequency GDP models. In this article, I’ll take a look at the long-leading, leading and coincident indicators, which will show some weakness exists.

What’s behind the Chinese sell-off? It’s partly due to an expensive market. But equity markets are leading economic indicators, meaning a connection exists between the overall Chinese slowdown and its equity market.

As the new year starts, the world economy is still in a difficult situation. The Chinese slowdown is impacting a number of developing countries, slowing their top-line growth. Deflationary pressures continue. But now, we have an event (the Chinese market drop) that triggered concerns about global, leading to action (a global sell-off). Don't be surprised to see increased volatility in the coming few months.

Overall, this week’s sell-off isn’t surprising in light of the weakening technical and fundamental environment. Prices for riskier equities (IWMs) have been weak for nearly 6 months. Transports – whose price action should theoretically confirm broader upward price movement – have been in a bear market (below the 200 day EMA) for 7 months. The SPYs couldn’t get above the 110-112 price level for all of 2015. And now the QQQs have fallen below their 200 day EMA. And the “average” stock is now in a bear market.

If the bond market shared the Fed’s optimism, we’d be seeing yield spreads widen. We’re seeing just the opposite.

The Pacific Rim is suffering from the Chinese slowdown. China’s decreased appetite for raw materials is negatively impacting the giant Australian raw material build-out of the last 10 years. Japan’s intra-regional trade is slowing as well. There are no signs of a recession on the horizon. But it is obviously one step closer in the current environment.

The industrial sector starts the year in a mild recession while the market is becoming defensive in its sector rotation.

The treasury market doesn’t see bombastic growth nor a recession; merely more of the same middling growth for the foreseeable future.

The Fed wouldn’t have raised rates if they didn’t have confidence that the US economy would be able to handle higher rates. So, let’s take a look at coincident, leading and long leading data to get an idea for the strength of the US economy now, but, more importantly, in the next 12-18 months.

As we near year-end, it seems appropriate to take a macro look at the US economy. This week, I’ll look at the US consumer while next I’ll take a look at business.

While both service and manufacturing PMIs continue to show moderate expansion, the Conference Board’s and OECD-s LEIs are showing weakness, largely due to negative contributions from the manufacturing sector. Weak emerging economies and the strong sterling are tamping down global demand. So long as domestic demand remains strong, this shouldn’t lead to a decline in GDP. But industrial weakness is never a good development and should be monitored.

As we go into year end, the world economic situation is tenuous. The US, UK and EU are doing fairly well, but Japan and China are weakening. And while Australia is growing, it's clear the Chinese slowdown is hurting. Overall, as noted by the Dallas Fed, the global economic environment is fragile.

As we near year-end, we have more of the same: a market in desperate need of revenue growth isn’t getting any. Therefore, prices are weaker.

The combination of weak labor utilization, weak inflation and an already challenging environment for the industrial sector (that will be made worse by the resulting stronger dollar) provide a strong counter-argument to timing of this rate increase.

The consensus is the Fed will raise rates at their next meeting. The latest employment report all but baked this into the cake. However, I’m not so sure this is a good idea.

This week’s column focuses exclusively on the technical side of the US market. I’ll be using three weekly charts to illustrate my concerns about the structure of the US equity markets.

This was a very light week of news. Only the BOE had a policy meeting. And other major countries released very few economic numbers.

Chairperson Yellen offered her assessment of the US economy in a speech to Economic Club of Washington. First, the good news. Growth, while moderate, is still positive, printing at 2%-2.5% for the first three quarters of 2015. And real final domestic purchases were over 3% in the 3Q. This tells us that consumers continue to spend and businesses are investing.

For the first time in 36 years, the manufacturing sector is contracting; the ISM manufacturing index printed at 48.6. New orders dropped 4 points to 48.9 while production decreased 3.7 points to 49.2. Only 5 of 18 industries expanded.

Why is the world economy growing below trend? That seems to be the central question economists are asking since the Chinese market intervention over the summer.

One of the central debates occurring within the Fed regards the causation of current inflation weakness. Some, like Fed President Bullard and Chairman Yellen argue low oil prices are solely responsible for the weakness. Ohers like President Brainard and Chicago Fed President Evans see a more nuanced picture involving declining international trade negatively impacting a wide swath of commodity prices. Regardless, this week various organizations published stories to support and counter each argument. As for oil prices, Goldman Sachs sees oil prices at $20 in the next 12 months.

The BEA issued its second GDP report last week, increasing the 3Q GDP estimate to 2.1%. Real gross domestic purchases – a measure of strictly domestic demand – increased 2.8% Y/Y.

The news continues to move in a bearish direction. Although the UK and Australia are in decent economic shape, neither country is setting growth records. And on the bearish side, Mario Draghi stated the EU recovery is weak and may need additional stimulus while Japan entered a technical recession for the second time in two years. And all this is occurring at time when the global growth juggernaut of China is slowing. Overall, the scales appear to be more and more tipped in a bearish direction.

The Conference Board reported the LEIs and CEIs this week: LEIs increased .6% while CEIs rose .2%. The only negative LEI component was the ISM manufacturing new orders index, which subtracted .05% from the total number. But two other leading manufacturing numbers were positive. Perhaps best of all, the average workweek of production workers added to the number. Three of four CEI components expanded; only industrial production contracted.

For the bond market, the release of the Fed minutes was this week’s biggest news. The Fed described employment positively. They also noted personal consumption expenditures and capital expenditures were “solid.” Housing was mixed, but continued to show a general, slow recovery. Industrial production was weak, but largely due to the strong dollar and weak international environment. As for inflation, they noted that overall CPI was weak, but expected it to rise with oil and import prices over the next 12-18 months. As for rates, the Fed felt the next hike would be in December:

Last week, Fed President Rosengren offered his analysis of the US economy: Many headlines have focused on real GDP growing at only 1.5 percent in the third quarter. However, I would like to share with you a measure that focuses on domestic demand – real final sales to domestic purchasers. This statistic is similar to GDP, but excludes fluctuations in inventories and net exports. This leaves consumption, investment, and government spending – in sum, a measure that tries to capture the underlying strength in domestic demand.

Despite the persistence of low inflation, the Fed will probably raise rates in December. This begs the question, why? A Bloomberg article last week provides the answer.

If the SPYs hit a record high, I don’t see it lasting, barring a change in the underlying fundamentals.

The problems inherent in the Fed’s reasoning makes it look more and more that they’re using last year’s ideas for this year’s problems. It appears more and more that central bankers need to drastically rethink their models and assumptions.

From a policy perspective, the decline in Chinese demand and the relative over-supply of commodities within China adds downward pressure to a variety of commodities. This situation is likely to continue.

Normally, analysts’ projections diverge somewhat around a statistical norm. That is, it’s usual for a group of 40 analysts to project the upcoming quarterly GDP growth rate between 1% and 3%. Currently, however, there is a fair degree of uniformity among analysts regarding the outlook. And that’s not a good sign.

The main US news this week was not economic, but political: Kevin McCarthy withdrew his bid to become Speaker of the House. As of this writing, several candidates have announced their desire to seek the position, but there is no clear front-runner. This couldn’t happen at a worse time: within the next 60 days, the debt ceiling must be raised and Congress must vote on a budget. And the leadership vacuum is occurring when 3Q US growth is projected to be weak.

The latest Fed Minutes noted the US is still in fairly good shape. The US consumer continues spending, unemployment is low, retail sales are expanding moderately, and purchases of durables goods (vehicles and houses) are positive. The primary negative is weak wage growth. But the strong dollar, weak overseas economies and slowdown in the oil patch is hurting the manufacturing sector.

This week, it was the IMFs turn to downgrade their global growth projections, which they did on October 6: The IMF’s latest World Economic Outlook (WEO) foresees lower global growth compared to last year, with modest pickup in advanced economies and a slowing in emerging markets, primarily reflecting weakness in some large emerging economies and oil-exporting countries.

A rate hike of at least 25 basis points was a done deal a few months ago. But recent global and domestic events have greatly lowered that possibility. It began with the Chinese equity sell-off followed by the surprise yuan devaluation. Recent Chinese manufacturing weakness adds to the mix. Although some recent US news has been positive, continued price weakness, lower industrial production and a recent employment slowdown show the US is not immune to the slowing international environment.

This week’s economic news was mostly positive. Manufacturing is still expanding and consumers are still spending, especially on durable goods. But the stronger dollar and weaker international environment are clearly taking their toll, as the ISM is just barely in expansionary territory. The markets are in somewhat precarious shape as we enter earnings season; they remain expensive and therefore need to see topline revenue growth. Unfortunately, that doesn’t appear to be coming.

Overall, the tone of news continues to lean negative. China continues to slow. Japan is clearly having problems regaining momentum after last year’s sales tax increase and Canada just missed being in a technical recession. The EU and UK are growing moderately, but not impressively. And it appears even the US is starting to import some of the global weakness.

Despite recent financial turmoil, no one has provided a concise explanation of the commodity super-cycle, one of the primary macro-economic forces causing recent volatility. That is, until now. In a September 21 speech, Bank of Canada Governor Stephen Poloz offered the following explanation:”

The U.S.’ immunity to international economic weakness continues. In their latest policy statement, the Fed once again described U.S. growth as “moderate.” With the exception of industrial production, this week’s economic releases confirm that assessment.

Analysts’ recent adjustments lowering global growth projections are in line with recent events; China’s economy continues slowing. This lowers commodity prices, which decreases economic growth of commodity exporting countries. Hence, the primary causation of Australia’s below trend growth and Japan’s weaker economic performance. The US is somewhat immune; Chinese trade accounts for a fraction of US GDP, limiting the impact. The EU is a bit more exposed, due to their increased reliance on trade.

There has been a slight but important shift in news coverage over the last few months. It started with the wild gyrations of the Chinese stock market, which, in retrospect, granted journalists permission to write more negative stories about the global economy. Since then, we’re seen more discussion about EM capital flight, the fiscal troubles of Brazil and the potential issues related to Russia. The news is hardly catastrophic; it simply represents the natural ripples flowing out from China’s attempt to change its economic model and the potential Fed rate hike coming down the pike.

The Federal Reserve released the latest Beige Book on Wednesday which showed a modestly expanding economy. While construction, aerospace and the auto industry led to manufacturing growth, cheap imported substitutes and the strong dollar continue providing headwinds. Retail, tourism and service sectors reported moderate growth. Housing sales and construction continue growing, but low inventory is driving prices higher. The imminent Fed rate increase is pulling some projects forward. The overall trend of loan growth and declining delinquencies continues.

The potential negative impact of China’s slowdown is sinking into policy maker’s decision making process and trader’s analysis. Money is flowing from emerging to developed economies; emerging markets and currencies are underperformers relative to developed markets. The potential for China to export deflation is being discussed. And central bankers are acknowledging the slowdown by lowering growth forecasts and opening speculating about additional monetary stimulus. As we leave the summer doldrums and enter the last four months of trading, the environment has clearly changed.

The strongest news of the week was the upward revision of 2Q GDP from 2.3% to 3.7% (Q/Q). All sectors contributed. Personal consumption expenditures increased 3.1% with contributions from durable goods purchases (+8.2%) and non-durable goods (+4.1%). Residential construction increased 7.8% while non-residential was up 3.1%. Equipment was down .4%, but this can be attributed to oil sector’s weakness. Finally, exports increased 5.2%. Overall, this report was very encouraging, especially considering 1Q weakness.

The fundamentals overall are slightly positive because they give companies an environment where they can grow top line revenue. The problem is most companies are just barely doing so. Even excluding the energy sector, top line revenue was only up 1.1% last quarter. Yes, it’s positive, which is obviously better than the alternative. But with market is already pricey; a 1.1% revenue increase doesn’t add a lot of upside room.