Will we have a Wall Street crash in October?

In addition, oil prices are at record levels and the yield curve almost flat, both usually signals of a recession ahead.

Listen to the Barbie doll commentators of financial TV and you could be forgiven for thinking that the US capital markets were doing something other than moving sideways this year, awaiting an event to give them a positive or negative direction.

Summer is usually a period of very light trading when not much happens to move markets. But there are a lot of professional commentators who privately think this autumn is going to see some serious fireworks.

Outside the US it is far easier to pinpoint an economic slowdown. The UK is in a retail and housing recession with the consumer on the floor; the euro zone is barely growing at all; China has decelerated from last year's breakneck growth; and Japan looks to be in trouble again.

Inside the US the ongoing housing boom is keeping the economy moving ahead with home owners borrowing against the expectation of housing equity gains.

As the UK experience has most recently demonstrated, this kind of an investment party does not last forever. And when it goes sour the whole economy takes a cold shower.

It needs little imagination to see that with a national debt of $24 trillion and counting the US economy must shortly face a Day of Reckoning. Then home owners will have to deal with high debts against assets that are falling in value.

This is bound to produce the kind of downturn already evident in the UK and Australia, and given the US twin budget and trade deficits could be much worse.

Now October is traditionally the month for Wall Street crashes, and only a fool would make a prediction that such a rare event will occur this year. But the balance of probabilities must be higher than for a long time.

The 'random event' that would trigger a Wall Street crash is not hard to find, and the most likely is a further, sudden upward spike in the price of oil, as if $60 a barrel is already not enough to be doing serious economic damage that has yet to become apparent.

One thing that makes a US recession almost inevitable is the flattening of the yield curve. This is the so-called 'conundrum' that concerns Fed Chairman Alan Greenspan whereby rises in short-term rates have not resulted in higher long-term rates, leading to cheap money which has fuelled the house price boom.

Indeed, if the Fed carries on raising interest rates then we may see an inverted yield curve with short-term rates higher than long-term rates, and since 1957 this has always signaled a recession.

With so many factors to worry US economists it is hard to understand how US capital markets can be so optimistic at the moment. Perhaps that is the real 'conundrum' which will unwind this autumn, perhaps in October.