As I've said recently, my research indicates that stocks may trade in a volatile sideways pattern throughout the remainder of 2008. My investment models suggest that such a development has now begun.

While I expect current (and likely future) initiatives taken by the U.S. government and the Federal Reserve to alleviate the fallout from the subprime mortgage debacle and to provide a level of support for stock prices during the months ahead, there is no major catalyst at this time to support a sustainable stock market up-trend.

Over the past few days, the mainstream media has led investors to believe that the credit crunch is over and that both the financial and housing sectors will continue to rebound.

However, recent reports from investment-banking firms and trade organizations reveal quite the contrary.

For example, Goldman Sachs, Lehman Brothers, and Morgan Stanley recently reported that they expect their fiscal year 2008 revenues and earnings to decline significantly as a result of the difficult capital markets environment.

Last week, Standard & Poor's reduced the corporate credit ratings for both Goldman and Lehman to negative because S&P's analysts expect those investment-banking firms' profits to decline by up to 30 percent this year.

Meanwhile, analysts at JPMorgan lowered their full-year 2008 earnings projections for Merrill Lynch by 45 percent on concerns that the third-largest U.S. securities firm might disclose further write-downs on subprime mortgages.

Analysts at Goldman Sachs also have announced that they expect investment banks, brokerage firms and hedges funds to report up to $460 billion in U.S. credit losses later this year due to the collapse of the subprime mortgage market, or almost four times the amount already disclosed.

In regard to the supposedly improving housing market, the National Association of Realtors (NAR) reported that sales of existing homes fell sharply during February even though the prices of those homes were significantly reduced.

To be more specific, sales of existing homes declined 24 percent during February compared to the same period a year ago, the biggest percentage drop since NAR began collecting data on existing home sales in 1999.

According to Standard & Poor's, home prices fell 11.4 percent during January, the steepest drop since S&P started collecting data on home prices in 1987. The S&P/Case-Shiller index of home prices in the top-20 U.S. home markets has now fallen for the 13th month in a row.

My research indicates that home values will continue to fall during the months ahead as foreclosures add to the glut of unsold properties already on the market and tighter lending rules prevent many interested home buyers from getting a mortgage.

Last month, U.S. home foreclosure filings rose by 60 percent and bank failures more than doubled.

As you can see, the fallout from the subprime mortgage debacle is far from over. The slumping housing market and slowdown in the financial sector will likely lead to further job cuts over the coming months, which in turn will lead consumers to further shut their pocketbooks. The International Council of Shopping Centers has announced that U.S. retail sales rose last week at the slowest pace since June 2003.

In light of the fact that the employment situation is continuing to deteriorate and consumer expectations regarding future economic conditions is continuing to decline, I expect the U.S. economy to experience further declines in consumer spending and retail sales over the coming months.

As a result, the U.S. economy will grow at a very sluggish rate throughout the remainder of 2008 or perhaps fall into a recession.

Harvard economist and former chief economic adviser to Ronald Reagan, Martin Feldstein, agrees with my analysis. Feldstein recently said that he expects the U.S. to experience the worst recession this year since World War II.

By the way, Feldstein is now the CEO of the National Bureau of Economic Research — the organization that determines the dates when U.S. recessions begin and end.

So, you can listen to the Wall Street cheerleaders who earn their incomes by persuading investors like you to always remain active in the equity markets, or you can pay attention to folks like Mr. Feldstein.