Markets Are Dropping, But Not For The Right Reason

The data I had expected is finally coming out:

Retailers Posting Disappointing Sales In April

Sovereign debt default fears throughout Europe may be driving the recent market "correction." But the real concern to the US economy should be that growth may once again stall and send us into another recession.

Let's look at the facts:
Government spending is drying up:

• No more homebuyer tax credits
• No more government purchasing of mortgages
• Unemployment benefits are expiring

Meanwhile, foreclosures remain high. Unemployment remains in double-digits, when accounting for unemployed and under-employed. Personal bankruptcies are on pace to exceed last year. And now, the consumer is beginning to realize that their own spending must be curtailed.

Since February, I've been warning about a slowdown in consumer spending, which is the primary driver of the US Gross Domestic Product (GDP). I still believe analysts haven't factored this into their predictions for current quarter corporate earnings. I expect earnings disappointments by mid-summer.

Time to stay defensive, with plenty of cash on hand and your equity account stocked with quality dividend paying stocks. My mutual fund choice for long-term holding remains AIM Diversified Dividend Fund, which I own.