This week, Zacks Equity Strategist Mayur Thaker, CFA discusses:

• His latest assessment of what leading indicators say about the economy and market ahead. To make his case that these metrics point to a recession in 2024, he points to U.S. manufacturing in recession for over a year, personal savings depletion, cyclical GDP and employment entering contraction, and other troubling signals.

• Mayur also analyzes a number of negative trends in credit and banking. He notes that 14% of loans—and 44% of office loans—are underwater, putting up to 300 regional banks at risk of solvency runs. In addition, credit card delinquencies are rising. Mayur notes that shares of Discover Financial Services (DFS) declined -10% following Q4 earnings. DFS is seen as a bellwether of the U.S. middle class.

• Mayur’s conclusion is that the market is substantially overvalued and that analysts will mark down FY 2024 earnings forecasts. He notes that markets are priced for earnings growth at a forward P/E of 18-20x, and if that doesn’t happen, there will be a substantial drawdown. Finally, Mayur offers his ideal capital allocation for the low-growth environment he sees ahead.