Topline
Fears of a sharp economic downturn due to President Donald Trump’s ever-changing tariff policies are pervading Wall Street, as some of the most trusted observers of the economy say the U.S. is far from able to declare victory on a tariff-driven recession, and the top economist at one of the world’s largest asset managers says there are overwhelming odds Trump’s trade war will sink the U.S. into a recession.
US President Donald Trump flanked by his two top economic officials earlier this month in Treasury … More
Key Facts
Torsten Slok, the chief economist at asset management titan Apollo Global Management, wrote this weekend he believes there’s a 90% probability the U.S. will fall into a “Voluntary Trade Reset Recession,” slamming Trump’s trade policies for being “implemented in a way that has not been effective” after his “administration inherited an economy with strong growth.”
Small businesses will be “particularly” hard hit as they “do not have the working capital to pay tariffs,” Slok added, predicting “well-run generational retailers” will go bankrupt if tariffs stay at the current levels.
Bank of America CEO Brian Moynihan said last Tuesday his bank’s baseline economic forecast does not call for a recession this year, but other big banks’ economic models still indicate the chance of a recession this year remains a tossup: Morgan Stanley forecasts 40% odds, Goldman Sachs places 45% likelihood of a recession over the next year and JPMorgan Chase projects a 60% chance.
National Economic Council director Kevin Hassett told Fox Business’ on Monday he is “100% not” expecting a recession in 2025, explaining recent discussions with CEOs indicated the “uncertainty over tariffs” won’t be “a big drag” on the economy.
Though the Trump administration’s backdown early this month from its most aggressive tariffs alleviated concerns the U.S. was on the cusp of a recession, Hassett’s confidence is far from a consensus view among Wall Street bigwigs and prominent economists.
Ray Dalio, the billionaire founder of the world’s largest hedge fund, Bridgewater Associates, said in a last Sunday interview with NBC News: “Right now we are at a decision-making point and very close to a recession, and I’m worried about something worse than a recession if this isn’t handled well.”
Lawrence Summers, the former Treasury Secretary during President Bill Clinton’s term, said in a last Monday editorial podcast in The New York Times he believes it’s “six in 10 or better that a recession will start this year,” explaining: “The pause is certainly better than if we had simply charged along on the catastrophic path that we’re on, but anybody who thinks the genie is back in the bottle and that it’s all now OK should reconsider their position.”
Last week, Summers predicted such a downturn would leave an additional 2 million Americans unemployed, a more than 28% increase from the 7.1 million unemployed Americans in March, and a $5,000 or greater decline in annual household income.
Moody’s Analytics Mark Zandi said last Monday on “CNN News Central” he sees the U.S. sinking into a recession over the next “three, four” weeks if the policy uncertainty is still “very thick,” saying he hopes “the president and the administration kind of finds an off ramp here and the trade war de-escalates.”
Kristalina Georgieva, the managing director of the United Nations agency IMF, said last Thursday the fund made “notable markdowns” to its global economic growth forecasts due to trade disruptions, though it still does not predict a recession, while warning the “high uncertainty raises the risk of financial market stress.”
Bank Of America Survey Finds Investors’ Economic Growth Expectations At 3-Decade Low
Some 42% of big money managers now expect as of April—the fourth-highest monthly reading of the last two decades for Bank of America’s April fund manager survey, which also found the 82% of respondents expect weaker global economic growth, the highest reading in 30 years. The closely watched poll was conducted among 195 managers of an aggregate $444 billion assets under management April 4-10, the week after Trump announced his country-by-country tariffs.
Crucial Quote
“The prospect of a recession has increased,” Goldman CEO David Solomon said in an earnings call last week. “Our clients, including corporate CEOs and institutional investors are concerned by the significant near-term and longer-term uncertainty that has constrained their ability to make important decisions,” continued Solomon.
News Peg
Corporate earnings season is underway, which should better reveal the health of the economy during the first three months of 2025. United Airlines took a rarely seen step this week of issuing a pair of profit forecasts, one in the case of a recession, and one in the case of more stable growth. “A single consensus no longer exists, and therefore the Company’s expectation has become bimodal – either the U.S. economy will remain weaker but stable, or the U.S. may enter into a recession,” the company wrote in a regulatory filing.
Gold And Oil Prices Hint At Potential Global Slowdowngold And Oil Prices Hint At Potential Global Slowdown
Trading in two of the world’s most precious commodities certainly point to the prospect of a global recession. Gold prices are up more than 20% this year to a record $3,400 per troy ounce as investors flood into the historic safe haven asset, while prices for international benchmark Brent Crude sank this month to their lowest point since 2021 as traders braced for a potential global weakening in oil demand as economic activity slows. “Along with simmering geopolitical tensions, gold is benefiting from worries that higher tariffs will kindle inflation,” Solita Marcelli, UBS Global Wealth Management’s chief investment officer Americas, wrote in a recent note to clients, setting a $3,500 per troy ounce price target for the precious metal.
Jamie Dimon’s Recession Warnings Influenced Trump’s Pause
In an interview just hours before Trump paused many of the more than 10% country-by-country levies, JPMorgan Chase CEO Jamie Dimon told “Mornings With Maria” he believed a tariff-spurred recession is “probably” a “likely outcome,” adding he’s heard “recessionary talk” in conversations with other business leaders. Trump said the comments from Dimon, the head of the nation’s largest bank by assets and market value, partially inspired his pause. Economists at JPMorgan had labeled Trump’s policies as the “largest tax increase” since 1968 which will “fall heavily on the US consumer.” In JPMorgan’s earnings call, Dimon repeated his pushback against Trump’s targeting of allies in his trade war, explaining the “most important thing to me is the Western world stays together economically.”
Stock Market Signals Slowdown Fears
Stock prices don’t completely correlate with economic growth, but equity investors are clearly pricing still in significantly increased odds of a down stretch for the U.S. economy. The S&P 500 briefly dove into a 20% bear market last week, wiping out about $10 trillion in market value, led by stocks considered the most vulnerable to a slowdown, including artificial intelligence darling Nvidia and Elon Musk’s Tesla. But markets are still pricing “nowhere close to the worst case” scenario, Bhanu Baweja, UBS Investment Bank’s chief strategist, said. Even after the post-pause recovery, the S&P is still down 14% from its February peak.
Trump Administration Prepared Americans For The Possibility Of A Recession
Ahead of the “Liberation Day” announcement last week, Trump braced Americans for a possible recession. In a Fox News interview aired March 9, he would not rule out the possibility of a recession, cautioning Americans for a period of economic “transition” as his policies take hold and noting he’s paying little attention to stock market losses. In subsequent media appearances, Treasury Secretary Scott Bessent similarly declined to dismiss a potential recession and said the U.S. will go through a “detox period.” Bessent told NBC’s “Meet the Press” in an interview he believes it “would have been much healthier if someone had put the brakes” on ahead of the Great Recession. “Be Strong, Courageous, and Patient, and GREATNESS will be the result!,” Trump wrote on his Truth Social platform.
What Needs To Happen To Gdp To Trigger A Recession (it’s Not Negative—yet)
The technical definition of a recession is two consecutive quarters of negative growth in gross domestic product, a comprehensive measure of all goods and services produced in a country. The official quarterly GDP stats haven’t turned negative yet, but the Atlanta Federal Reserve’s real-time model ignited concerns by calling for -1.8% annual GDP growth in 2025’s first quarter, which would be the worst reading since 2020—though the estimate is likely skewed by its methodology, including how it accounts for a surge in gold imports.
Bond Market Is Shaky—but Yield Curve’s Still Intact
Elsewhere in financial markets, a flight to government-issued debt is evidence of a thirst for safer returns in the face of a potential recession, as yields for benchmark 10-year Treasury bonds have dropped by 40 basis points over the past three months (lower yields mean bonds got more valuable). But the most common bond market signal of a recession, the inversion of the yield curve, in which longer-term bonds have lower yields than shorter-dated ones, has actually normalized in recent months. The New York Fed’s bond-linked recession model calls for just 30% recession odds over the next year, down from the more than 70% odds in late 2023, a period which failed to materialize into a full-blown recession.
Consumer Confidence Signals Americans Bracing For Tough Times
Perhaps the most concerning signal over the last is a breakdown in everyday Americans’ conviction in the economy, as the Conference Board’s closely watched consumer confidence survey tumbled this month to its lowest level since 2021. That tracks with weaker spending, as February retail sales grew by just 0.2% from January to February, according to a report released March 17 by the Census Bureau, far worse than the 0.6% month-over-month increase projected by economists.
Unemployment Rate Is Still Fine
One of the most important hallmarks of the American economy, the labor market has shown some cracks in early 2025 as job creation slowed and layoffs spiked, but remains overwhelmingly strong, as March’s 4.2% unemployment rate sits well within the healthy historic norm. A key labor market recession indicator, the Sahm rule, flashes a far lower likelihood of a recession than it did when it peaked last summer, inspiring a short-lived market selloff in August.
What To Watch For
Trading in two of the world’s most precious commodities certainly point to the prospect of a global recession. Gold prices are up more than 10% this year to a record $3,200 per troy ounce as investors flood into the historic safe haven asset, while prices for international benchmark Brent Crude sank this month to their lowest point since 2021 as traders braced for a potential global weakening in oil demand as economic activity slows.
What To Watch For
Bessent and Trump have made clear they are lasered in on lowering interest rates, which are determined by the politically independent Fed. Typically, rates are only drastically cut during periods of economic distress, as lower rates typically stimulate economic growth as households and businesses are more likely to borrow with lower interest costs, though that uptick in loan activity can simultaneously lead to higher inflation as demand rises. The Fed is likely to hold off on further rate cuts “until tariff policy becomes clearer,” according to David Mericle, Goldman’s chief U.S. economist.
Further Reading
Source: https://www.forbes.com/sites/dereksaul/2025/04/21/forbes-recession-tracker-recession-odds-spike-as-trumps-tariff-liberation-day-approaches/