Montreal, Canada

In the 1980s, Wendy's was all the rage in television advertising with a loveable senior citizen complaining about the lack of meat in restaurant hamburgers; the famous motto, "Where's the Beef" was a big hit.

The same is true about this economic recovery. Manufacturing has indeed rebounded strongly since the depths of the recession in late 2008, but that's not the case for other parts of the economy, which remain sidelined by weak domestic consumption, tepid employment growth and a struggling housing industry.

Previous deep contractions in U.S. economic activity in the past have typically been followed by equally strong recoveries. The last deep recession in 1989-1991 resulted in a productivity boom in the 1990s resulting in the best ten-year stretch for stocks in U.S. history. Prior to that recession, the even deeper 1981-1982 contraction was followed by a boom across most segments of the U.S. economy starting in 1983-1984 supported by the Reagan Revolution.

But this recovery off the Q4 2008 recession lows doesn't look that impressive. Obama isn't Ronald Reagan. The Bush tax cuts expire next year and the government will raise income taxes on just about everything – dividends and capital gains. Reagan cut taxes spurred an economic revival at a time when the country was bleeding profusely.

Economic data this week points to a marked deterioration in housing and construction, jobless claims and business surveys in the Philadelphia region – all bullish for Treasury bonds and bad news for stocks. Inflation, including the ridiculous "core" rate produced by the government has declined sharply over the past month or so, further fueling fears of a double-dip recession. Companies, for the most part, continue to struggle implementing price hikes.

Bonds, which peaked north of 4% only a few months ago, recently rallied to yield just 3.06% on May 25th. The ten-year T-bond opens this morning yielding 3.21%.

Though I remain a long-term bear on bonds – especially Treasury bonds and most other sovereign paper – it's hard to argue with the primary trend; bonds just won't die. Deflation or, at the very least, accelerated disinflation, is making a comeback since the depths of the credit crisis in early 2009. Bonds will probably take out their December 2008 highs before this rally is over and that suggests stocks haven't hit a low in this cycle, probably a cyclical bull market within the confines of a long-term secular bear market that began in 2000 or late 2007 – take your pick.

Stocks have recovered smartly once again over the last seven days and bond yields have ratcheted higher.

Still, traders and investors don't seem overly enthused about this rally as trading volume remains anemic and mutual fund investors have started to redeem equity funds again. Many stocks are still in downtrends.

Inflation is being trumped by deflation this summer. Risk-takers beware.