Those who have openly subscribed in recent months to the robust-growth and higher-rates view include JPMorgan Chase CEO Jamie Dimon[marketwatch.com] and Morgan Stanley CEO James Gorman, and investors Paul Tudor Jones and Jeffrey Gundlach. There are many others.

In my view, this widely held wisdom is based on a profound misreading of economic and political reality and trends in the U.S. and around the world. I believe that a looming global recession and fear of deflation will lead the Fed to cut rates instead and reinstate quantitative easing, or QE, causing U.S. bond yields to fall.

First, it is important to understand that the 2008 financial crisis was never resolved. Aggressive fiscal- and monetary-policy tools--extremely low rates and multitrillion-dollar bond-buying programs--helped contain the crisis. But they didn't fix the problem. The global economy has been stabilized, but fundamental weaknesses remain.

An economic reckoning may surface as soon as the next few months.

In the U.S., second-quarter economic data look strong. But that is misleading. There are plenty of indications of weakness, including slowing sales of cars and houses, and a decline in mortgage refinancing. The cumulative effect of interest-rate hikes, frozen levels of real income, and rising oil prices will also weigh on the public's buying power.

In the corporate sphere, the boom in stock buybacks, which in May reached an astounding $174 billion, comes directly at the expense of capital investment that would boost economic growth. A potential global trade war is also detrimental; the U.S. dollar's weakness in 2017, combined with reinvigorated economies throughout the world, contributed immensely to U.S. exports...

June's interest-rate hike was most likely the last in the current cycle. The next major move by the Fed could be to lower rates, followed by more QE. The realization that this is happening will bring about a dramatic change in investors' views and will return U.S. bond yields to the 1.5%-2% level. The development, I believe, will be rapid and surprise a financial system dramatically underweight long-term bonds.

As we say, "happy times are here again" -- almost nonstop since 2009. So this editorial is bold call -- but it has really been a "bipolar" economy since the 2008 crisis; with every person able to see whatever they want to see in the mixed data... at some point, a clear trend will likely manifest...

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