Take a look at what has happened to income distribution, factor in how strong the stock market has been, and it's clear there won't be a recession anytime soon. That's the conclusion drawn by David G. Shulman, chief equity strategist at Salomon Brothers Inc. Shulman figures the upward shift in income makes overall consumption spending dependent on a narrower base of people. And the spending of rich folk, Shulman says, is determined not only by their salaries but also by changes in asset prices. Indeed, this wealth effect is quite powerful. "Like it or not," says Shulman, "the mutual-fund boom of the 1990s has made real economic activity more tied to the performance of financial assets than ever before." So the $850 billion advance in stock-market valuations in the first half doesn't portend a recession--unless it's reversed in a hurry.

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