Caution, uncertainty, and volatility underscore 2012

• Despite improving U.S. economic data, caution and uncertainty still rule the 2012 outlook

• Economic growth will stay below 2 percent on average in 2012 and volatility remains a key characteristic of growth and markets

• The European debt crisis remains a threat to U.S. recovery—a disorderly outcome would throw the U.S. into recession

• The demand side of the U.S. housing market shows some positive signs

• But the supply side of the housing market suggests that stabilization at a healthier level, of new housing starts, may still be a long way off

• The negative wealth effect from depressed home prices weighs negatively on consumer spending