The strategist warns that the American consumer is “walking towards the abyss.”

Trouble is looming for the American consumer, according to one strategist, and a significant decline in the labor market could lead to a recession.

“I think the American consumer is heading towards the abyss, basically,” Chris Watling, CEO of financial advisory firm Longview Economics, told CNBC on Tuesday.

He said a slew of recent economic indicators showed that consumers were quickly running out of excess liquidity, while household savings were under pressure.

“Of course, retail sales have been very strong over the last few months and everyone is very excited about that, but in reality, if you look at what’s happening, the household savings ratio has declined, and in fact, the savings ratio has been real. Income growth has been negative for three years,” Watling said. Months.

“So, it’s not all good news. I mean, quite the opposite, I think there are some real challenges coming for the American consumer,” he added.

His comments come even as data suggests the US economy may have delivered another stellar performance, heading into the latter part of the year.

GDP is expected to post an annual increase of 4.7% for the third quarter, according to Dow Jones estimates. The Commerce Department will release its first GDP estimate at 8:30 a.m. ET.

If these forecasts come true, the reading would reflect the strongest U.S. economic output since the last three months of 2021, when growth was just under 7%.

Many strategists, asset managers and executives remain concerned about the long-term economic outlook and will continue to closely monitor forward-looking signals for clues about whether the United States can avoid a recession.

The US economy and its pivotal consumer component have been written off many times before, but the Fed’s move to keep liquidity flowing in the sector has partly helped keep growth apace.

“We see on the margin that the consumer is under a lot of pressure, and in fact, the labor market is under a lot of pressure as well,” Watling said. At the edges.”

“We will get to the point in the next few months when I think the job market will start to deteriorate further, and that will start the recession when we get there,” he added.

When asked what his predictions might mean for the stock market, Watling replied: “I think the leadership is probably changing in this stock market. Technology has been under a lot of pressure since July, and I think the stock market is struggling to figure out exactly what the truth is.” Where does he want to go?”

“In our view though, I can see a bounce of a month or two. It’s been hit hard, markets have been falling since July but I think you want stocks to be underweight if you’re looking beyond that.” “The next few months,” he continued. “I think the United States is going through a difficult time.”

— CNBC’s Jeff Cox contributed to this report.