A slump in recent economic data coupled with enhanced trade war tensions between the United States and China have prompted Morgan Stanley to sound the alarm.  Morgan Stanley is warning that the U.S. economy is now on “recession watch” as the bond market shows warning signs of a downturn.

According to a report by CNBC, the bank said that the U.S. economy is now officially on a “recession watch.” The bank wrote: “Numerous leading companies may be starting to throw in the towel on the second half rebound–something we have been expecting.” Michael Wilson. the firms chief U.S. economic strategist added that market risks have been reflected in the bond market, pointing to an unusual phenomenon in government debt yields.

The stock market and economic outlook in the United States are “deteriorating,” says Wilson. “Recent data points suggest US earnings and economic risk is greater than most investors may think.” The current economy is one of utter bafflement, to be fair. The mainstream media is painting a rather rosy picture of near-perfect employment, however, defaults on loans and the sheer amount of financial distress on the average American household is rising.

As a matter of fact, the stock strategist highlighted a recent survey from financial data firm IHS Markit that showed manufacturing activity fell to a nine-year low in May. That report also revealed a “notable slowdown” in the U.S. services sector, a key area for an American economy characterized by huge job gains in health care and business services. Not to mention all the retail store closures, aptly dubbed the “retail apocalypse.”

Much of April and May’s data reflect a slowing economy. “Which means it weakened before the re-escalation of trade tensions,” Wilson continued. “In addition, numerous leading companies may be starting to throw in the towel on the second half rebound–something we have been expecting but we believe many investors are not.” This means that the trade war is not helping the economy, but it isn’t entirely to blame either.

Some of the blame should go to the mountains of debt piling up at corporations and households across the country. Americans have reached their “tap out” point, and many can no longer acquire any more debt.  All of this debt could be a catalyst for the next economic catastrophe, but you won’t be hearing about it from the mainstream media. The problem with debt is that there is an expectation that that money will be paid back.  And when it’s not, problems arise.

“The April durable goods report was bad, particularly the details relating to capital goods orders and shipments. Coming on the heels of last week’s crummy April retail sales report, it suggests second quarter activity growth is sharply downshifting from the first quarter pace, ” the Morgan Stanley economists wrote.