As the economy continues to ride the waves of uncertainty, a growing chorus of bearish forecasters is sounding the alarm, warning of a recession on the horizon. Like a dark cloud gathering on the horizon, the prospect of an economic downturn in 2025 is casting a long shadow, prompting investors and policymakers to take a hard look at the warning signs. From inflation’s stubborn persistence to the Fed’s delicate balancing act, the fault lines of a potential recession are beginning to show. So what are the key indicators that have these forecasters crying “buckle up”?
Bearish Forecasts and Recession Risks
Predictions from Wall Street experts are sounding the alarm, warning of a potential global recession in 2025. Mark Zandi, chief economist at Moody’s Analytics, is predicting a more than 50% chance of a global recession starting this year> His reasoning behind the high probability of a recession lies in the economic pressures stemming from Trump’s tariffs, which look more likely than not to push the global economy into a recession.
Zandi warns that if the US doesn’t back down on tariffs, a downturn could first start to hit the manufacturing, transportation, distribution, and agricultural sectors. The slowdown could then spread to the consumer discretionary sector, suggesting that consumers would pull back on spending in areas like entertainment, recreation, and hospitality “soon.”
If the economy tips into a recession, stocks could lose another 10% from the lows touched in the days after tariffs were announced. That implies the S&P 500 dropping 20%-30% from its peak in mid-February. If the economy can avoid a downturn, stocks have already likely hit bottom, Zandi said. “Buckle up. It’s going to be a difficult 2025, one way or another.”
JPMorgan’s 60% Chance of Global Recession
JPMorgan’s analysts are also sounding the alarm, warning of a 60% chance that the global economy tips into a recession. The bank’s analysts view the impact of Trump’s tariffs as decisively less business-friendly than originally anticipated.
JPMorgan raised its probability of a global recession from 40% to 60% shortly after Trump’s tariffs. The White House is still negotiating trade deals with other countries, but if left unchanged, the US tariff rate would rise to 24%, equivalent to around 2.4% of the US’s total GDP.
“We thus emphasize that these policies, if sustained, would likely push the US and possibly global economy into recession this year,” the bank said. JPMorgan’s chief US economist, Michael Feroli, said a two-quarter recession could begin as soon as the second half of 2025. In a separate note in April, Feroli’s team estimated that GDP could contract by as much as 1% over the third quarter and half a percent in the fourth quarter. The unemployment rate, meanwhile, could rise as high as 5.3%.
The Impact of Trump’s Tariffs on the Economy
The trade war and economic pressure are mounting, with 80% of fund managers saying they see the trade war triggering a global recession as the biggest tail risk to markets, according to a survey conducted by Bank of America in April. Betting markets have also been pricing in a higher chance that the economy could tip into a downturn this year.
The effects of tariffs on US trade policy are far-reaching, with JPMorgan’s analysts warning that Trump’s original tariffs would effectively result in the largest tax hike on consumers since World War II. When factoring in retaliatory measures from other countries, that could cause business sentiment in the US to sink, while supply chains would get disrupted.
Stock Market Predictions and Expectations
A recession looks likely to some forecasters on Wall Street — and they’re eyeing some big disturbances that could result if the economy does plunge into a downturn. Fears of a potential economic downturn have spiked since Trump unveiled sweeping reciprocal tariffs in early April. Eighty percent of fund managers said they see the trade war triggering a global recession as the biggest tail risk to markets, according to a survey conducted by Bank of America in April. Betting markets have also been pricing in a higher chance that the economy could tip into a downturn this year.
Wall Street’s 2025 Predictions
According to Wall Street, more gains are expected in the stock market next year. The average 2025 year-end price target for the S&P 500 is 6,539, a potential gain of about 8% from the benchmark index’s current levels.
- Average year-end price target for the S&P 500: 6,539
- Potential gain of about 8% from current levels
Here’s a complete rundown of Wall Street’s predictions and expectations:
Stocks have soared for the last two years since the October 2022 bear market low. Wall Street expects the gains to continue in 2025, predicting an average gain of about 8%. Here’s a complete rundown of Wall Street’s 2025 predictions.
The stock market has been on a tear since its October 12, 2022 bottom, with the S&P 500 and Nasdaq 100 up 70% and 101%, respectively. A strong economy has dispelled any lingering fears of a potential recession, consumers are on solid footing, and perhaps most importantly, corporate earnings are rising to record levels.
So, after back-to-back years of more than 20% returns for the S&P 500, what’s in store for 2025? According to Wall Street, more gains, albeit not at such a fast pace.
Mark Zandi, Moody’s Analytics
Estimated probability of a recession: More than 50% chance of a global recession starting this year.
Reasoning: The economic pressures stemming from Trump’s tariffs look more likely than not to push the global economy into a recession, Zandi said in an interview on The David Lin Report on Friday.
“It all revolves around trade policy. If the administration can take an offramp on policy, lower the tariffs, de-escalate the trade war, then I think we have a fighting shot of making our way through without a downturn. But I say that with each passing day with less confidence, because the longer this goes on, the more damage it’s going to do, and the harder it is to bring it all back from the brink,” Zandi said.
JPMorgan
Estimated probability of a recession: 60% chance that the global economy tips into a recession.
Reasoning: Trump’s tariffs have made US trade policy “decisively less business-friendly” than the bank had originally anticipated, analysts wrote in a note in April.
JPMorgan raised its probability of a global recession from 40% to 60% shortly after Trump’s tariffs. The White House is still negotiating trade deals with other countries, but if left unchanged, the US tariff rate would rise to 24%, equivalent to around 2.4% of the US’s total GDP.
“We thus emphasize that these policies, if sustained, would likely push the US and possibly global economy into recession this year,” the bank said.
Conclusion
In conclusion, the bearish forecasters are sounding the alarm, warning of a potential economic downturn in 2025. The signs are ominous, with rising federal deficit, slowing global growth, and a volatile stock market all contributing to the perfect storm. These experts are not crying wolf, but rather, they are highlighting the vulnerabilities in the system that need to be addressed.
The implications of a recession in 2025 are far-reaching and multifaceted. It would have a ripple effect on the global economy, leading to widespread job losses, decreased consumer spending, and a significant decline in economic output. Moreover, it would also have a profound impact on the political landscape, potentially altering the course of history. As the forecasters sound the warning bells, policymakers and business leaders must take heed, and start implementing measures to mitigate the impending economic storm.
As we move forward, one thing is certain – the road ahead will be fraught with challenges. However, by acknowledging the warning signs and taking proactive steps, we can minimize the damage and build a more resilient economy for the future. As the bearish forecasters so aptly put it, “buckle up” – the future of our economy depends on it. Will we heed the warning and take control of our economic destiny, or will we be caught off guard, left to pick up the pieces of a shattered economy? The clock is ticking.