BOSTON (TheStreet) -- While Americans are focused on the impasse in Congress that has turned the budget-making process into an international crisis, the nation's already-fragile economy may be heading toward another recession.As an example of how bad things are, the Commerce Department yesterday said gross domestic product (GDP) growth -- a measure of all goods and services produced in the U.S. -- rose at a meager 1.3% percent annual rate in the second quarter, well below economists' projected 1.8% growth. A year ago, the economy expanded 3.8%.
Larson said that, conversely, "from a corporate perspective, there's not much to complain about because they're in relatively healthy financial condition." He said most major firms' cash holdings are at or near all-time highs, and corporate profit margins are also close to all-time bests. "There are really no signs of material economic weakness in the earnings we've seen in the second quarter." But Zandi notes rather ominously in his report that "the odds of a new recession in the next year have risen to one in four. U.S. sentiment is extraordinarily fragile; it is not hard to envisage consumers pulling back and businesses cutting payrolls if anything else goes wrong. "A failure by lawmakers to quickly raise the debt ceiling and agree on a deficit-reduction strategy certainly qualifies, as does a near-term Greek default or a bumpy landing in China," said Zandi. Investors are seeking safe-harbor investments to avoid the volatility that the debt-ceiling crisis has caused and to avoid a market crash if there is no resolution from Congress. Morningstar's Larson said gold is a popular choice for investors now, although it has no real economic utility, but investors are also investing in the currencies of triple-A rated countries such as Switzerland, Canada, New Zealand and Australia. He cited two health-care stocks as relatively solid choices in the current turmoil because they are relatively "economic insensitive" as necessities. They are the drug makers Abbott Laboratories ( ABT) and Pfizer ( PFE). Larson said Pfizer is going to have to deal with the loss of its top money-making drug Lipitor, which faces patent expiration later this year. "But if you look beyond that, the company said it expects to earn above $2 a share in 2012 and it's trading at just over $19 per share, and has a 4.13% dividend yield. Another stock that should weather the economic turmoil in good shape, he said, is Exelon ( EXC), a diversified electric power producer, and the largest nuclear power producer in the U.S. Larson said Exelon should benefit from steadily rising energy costs. It is trading at a relatively cheap 14 times forward earnings estimates. "We think it's worth $58 per share" and it's now trading around $44 and has a dividend yield of 4.7%.