There are three potential areas of concern for the economy in the next 12 to 24 months that I see:
1. Inflation – this looks temporary to me. Demand side effects will probably fade by the end of summer, and supply side bottlenecks should fade within the year.
2. Stock price evaluations – I strongly suspect these are near secular highs and are subject to a serious pullback in the next several years.
3. Housing – The biggest reason I don’t see this as being in a bubble is the lack of “fog-the-mirror” mortgages being originated. Take away reckless lending spurring short-term speculative demand, and there is only so much that the market can deviate from the norm. This means that any downturn would probably be closer to the 4% downturn between 1990 and 1992: