Value strategist Ron Muhlenkamp says he’s not finding a lot of value in the stock market right now. And while he doesn’t think a recession is around the corner, he says he is finding that a whole lot of potentially dangerous margin debt is piling up.

“We do not see signs that a recession is imminent,” Muhlenkamp writes in his second-quarter market update. “We remain of the opinion that higher interest rates would be beneficial for the economy, though we have no opinion regarding when the Federal Reserve might start raising short-term rates.”

“We keep looking for bargains … but we’re not finding many,” Muhlenkamp adds in additional commentary. “We’re seeing a decline in companies’ growth rates in revenues and earnings per share (EPS) for the broad market (1st quarter 2015 versus 2014). When revenues flatten, companies can usually squeeze out extra earnings for a quarter or two, but it’s a limited amount. Add to this mix, a strong U.S. dollar, which hurts companies’ profits when sales in foreign currencies are translated back into dollars for accounting purposes. For these reasons, market momentum may reverse.”

But Muhlenkamp says the US market may be bolstered by low interest rates in Europe and Japan, where investors are getting punished for saving. “If their money comes to the U.S. markets, it could well continue to drive prices up for a time,” he says. “There is no clear market direction right now; we are watching closely to see what develops. That’s why we think it’s a ‘stock picker’s market.'”

Muhlenkamp also notes that margin debt, which had grown quite high prior to the last 2 recessions and bear markets, is extremely high. “We think it’s being heavily driven by low interest rates and has more to do with hedge funds (and companies) borrowing to buy stocks,” he says. “If interest rates go up a little bit, borrowing on margin gets more expensive. And, if asset prices come down, that big margin can drive the decline mechanically. Normally, markets fall because people get fearful. … [But] markets can fall, despite an absence of fear. We can get a 5-10% drop in the market at any time, but there is a number…maybe it’s 12%, 15%, perhaps, 20%—I don’t know at which point margin calls may start to kick in and the selling cascades. The trouble is, this was true three years ago, and two years ago. No one knows whether, or at what level, the next trigger will occur.”