Economic forecaster Lakshman Achuthan is detecting a stark disconnect between Wall Street and the economy.

As stocks continue to hit new highs, he's worried investors are wrongly assuming an economic revival is underway.

"The actual data itself is just decelerating pretty hard actually," the Economic Cycle Research Institute co-founder told CNBC's "Trading Nation" on Monday. "I don't think we can remove recession risk from the table. It's still out there as long as you're slowing."

Achuthan sees the downtrend particularly affecting two key parts of the economy: retail sales and industrial production. He highlights the issue in this chart:

"On the manufacturing side, you have IP [industrial production] at a 3½-year low. It's deeply negative," he said. "On the retail sales front, you're having deceleration."

Achuthan, a former self-proclaimed super bull, began noticing slowdown signs in early 2018.

"All the hopes are the consumer is somehow going to rev up, and that's coinciding with the holiday season here," said Achuthan. "But when we look at all of our leading indexes that anticipate turning points in the U.S. economy, it's not there yet. So, we have more slowdown to go."

Yet, stocks are firing on all cylinders. But don't let that fool you, he says.

"A couple of months before the Great Recession, markets hit an all-time high. In 1990, right when that recession was starting, markets hit an all-time high," he noted. "In '01, they actually hit a high after the recession started. So, the market could be a little off on recession timing."

For investors who have to be in the stock market, he recommends staying defensive or looking abroad.

"You could look outside of the U.S. where we do have some real signs of cycle bottoming," Achuthan said. "I would particularly look at the eurozone and maybe a couple of places in Asia, ex-Japan."

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