There are a few developments that gladden the heart of nearly every business executive. Rising retail sales. Rising real incomes. Sustained job growth and household formation. And lower interest rates from the Fed.

U.S. business executives, investors, and typical citizens alike may have to wait awhile for a constructive dynamic to emerge regarding the first four, but there may be some good news regarding interest rates. We're headed back down to 1.5% - - or perhaps even lower - - regarding the Federal Funds rate, so says economist David H. Wang.

Further, Wang believes an interest easing is up ahead, even though that stance would seem to fly in the face of the Dow's recent rise/signs of life, and a July U.S. consumer price statistic of 0.8%, that indicated that inflation rose at its fastest pace in 17 years.

"The July inflation number was high, but the core inflation gain of 0.3% means the U.S. Federal Reserve has some breathing room on inflation, some leeway to cut interest rates, and they're going to need it," Wang said. Wang sees the Federal Funds rate, currently at 2%, falling to 1.5% by January 2009.

Bearish on U.S. stocks, economy through early 2009

As one might sense, Wang is not bullish on the U.S. stock market or U.S. economy over the next six to nine months. Here's why: "First, the U.S. housing market has not reached a bottom. We're not even close," Wang said. "People are watching the U.S. median home price [currently about $206,500], when what they need to scrutinize is inventory levels. We're still at nine-month and ten-month inventories levels in most regions, and a healthy market has only a three-four month inventory level. So don't look for any economic stimulus from the housing sector."
Second, and equally significant in Wang's interpretation, is job growth. Or should one say lack of job growth. "We have lost more than 400,000 jobs since November 2007, and the losses are likely to continue for at least two more quarters [Q3 and Q4], probably longer," Wang said. "Even with adequate export activity, it's almost impossible for the U.S. economy to grow at or near capacity without job growth. This workforce contraction will be a major factor in the Fed's decision to lower interest rates more."

Finally, although the slowdown is still young, the U.S. economy has not identified a growth catalyst. "All recessions and expansions start for a reason. During an expansion it frequently is a new sector, like technology, or a social trend, such as U.S. Veterans coming back from World War II ready to marry, start families, buy homes, and spend," Wang said. "Thus far, I don't see a catalyst for the next expansion, this will also weigh on the Fed, which will further tip the scales in favor of lower rates."

The earliest the U.S. recovery could begin, in Wang's view? "Possibly in Q2 2009, if we're lucky, but most likely, not until Q3 2009," Wang said.

Economic Analysis: Not the rosiest economic forecast for the next 6-12 months, but economist Wang makes a strong argument. Further, Wang is not the biggest interest rate dove. Keep in mind that investor Mark Mobius, chairman of Templeton Asset Management Ltd., told Bloomberg News earlier this month the Fed should eventually cut interest rates to 1% to stimulate demand.