{"id":13690,"date":"2025-03-24T19:50:51","date_gmt":"2025-03-24T19:50:51","guid":{"rendered":"https:\/\/zacksim.com\/blog\/?p=13690"},"modified":"2025-03-24T19:52:34","modified_gmt":"2025-03-24T19:52:34","slug":"recession-fears-have-re-ignited","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/recession-fears-have-re-ignited\/","title":{"rendered":"Recession Fears Have Re-Ignited"},"content":{"rendered":"\n<p><strong>Recession Fears Are Back<\/strong><\/p>\n\n\n\n<p>A little over a year ago, I wrote a <em>Mitch on the Markets <\/em>columnabout the growing likelihood of an \u2018economic soft landing.\u2019 I compared Fed policy and the economy in 2024 to what we saw in 1996, during the Greenspan Fed. Here\u2019s what I concluded:<\/p>\n\n\n\n<p>\u201c<em>In 1996, real GDP growth was volatile from quarter to quarter but rose 2.5% for the year, and the S&amp;P 500 climbed +22.68%. I won\u2019t be so bold as to call for a similar outcome in 2024, but the idea of modest GDP growth with solid double-digit gains in stocks does not seem out of the realm of possibility. In fact, I think it\u2019s more likely than unlikely<\/em>.\u201d<\/p>\n\n\n\n<p>I made my market call on the premise that the Fed and the U.S. economy would achieve an \u2018economic soft landing,\u2019 which went as hoped last year\u2014the economy grew 2.8% and the S&amp;P 500 rose +25%.<sup>1<\/sup><\/p>\n\n\n\n<p>But 2025 looks a bit different out of the gates.<\/p>\n\n\n\n<p><strong><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\">Can the Market Keep Its Momentum in 2025?<\/a><\/u><\/strong><\/p>\n\n\n\n<p>Last year, the economy grew, and stocks soared\u2014but 2025 is already shaping up differently. With shifting Fed policy and evolving market conditions, understanding what\u2019s ahead is crucial.<\/p>\n\n\n\n<p>Download our exclusive <strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\">March Stock Market Outlook Report<sup>2<\/sup><\/a><\/u><\/em><\/strong> to see what\u2019s driving the economy and markets now\u2014and the strategies that could help position your portfolio for the next phase. Inside, you\u2019ll find:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Asset allocation guidelines<\/strong> for today\u2019s market environment.<\/li>\n\n\n\n<li><strong>Expert forecasts<\/strong> for inflation, rates, and economic trends.<\/li>\n\n\n\n<li><strong>Industry tables and rankings<\/strong> to help you spot opportunities.<\/li>\n\n\n\n<li><strong>Buy-side and sell-side consensus<\/strong> insights at a glance.<\/li>\n\n\n\n<li>And much more!<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to take charge of your financial journey, click the link below to get your free report today!&nbsp;<br><strong><u><br><\/u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\"><u>IT\u2019S FREE.<\/u><span style=\"text-decoration: underline;\"><u>&nbsp;<\/u>Download our <em>Exclusive Zacks March Stock Market Outlook Report<\/em><\/span><\/a><\/strong><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\"><span style=\"text-decoration: underline;\">2<\/span><\/a><\/sup><\/p>\n\n\n\n<p>At the start of the year, investors were focused on the pro-growth, pro-business stance of the new administration. Many were pricing-in an era of lower taxes and deregulation, which consensus believed would drive M&amp;A and economic growth higher. Confirmation of an \u2018economic soft landing\u2019 seemed all but assured.<\/p>\n\n\n\n<p>But as initial policies began taking shape, confidence in a soft landing has somewhat dissipated. And recession fears have returned.<\/p>\n\n\n\n<p>As I wrote last week, economic and trade policy uncertainty has spiked in the past few weeks. Many business leaders and investors assumed the administration would be sensitive to stock market volatility, perhaps pivoting policy in response. But that does not seem to be the case.<\/p>\n\n\n\n<p>Treasury Secretary Scott Bessent has suggested that the U.S. may need a financial reset after years of government-driven expansion and rising asset values, and Commerce Secretary Howard Lutnick has similarly noted that tariffs are likely to cause an initial surge in prices. The refrain is that the economy may need to endure some short-term hardship for long-term restructuring.<\/p>\n\n\n\n<p>There\u2019s also the matter of reductions in the size of the federal workforce. The economic question to ask is whether the private sector will be able to fully absorb displaced workers at a time when businesses already face uncertainty over tariff policy. To be fair, the federal workforce declined by over 10% in the mid-1990s with no destabilizing effect on the jobs market, but that was also a time of steady, strong economic growth.<\/p>\n\n\n\n<p>A final point to make in the recession argument is that household financial sentiment is showing signs of stress. A recent survey by the New York Federal Reserve recorded the most significant monthly decline in household confidence since 2023, while the probability of Americans missing debt payments has also risen to levels not seen since early 2020. These indicators suggest that economic unease is growing.<\/p>\n\n\n\n<p>It is with this backdrop that the Federal Reserve must navigate its path on rates. Fed Chair Jerome Powell has signaled that policymakers are in no rush to adjust interest rates, and he has also hinted that the central bank may not immediately respond to tariff-driven price increases. For instance, if inflation accelerates further, the Fed will not necessarily rush to raise rates. They may opt instead to scrutinize data carefully, to distinguish between temporary price fluctuations and underlying inflationary trends. Fed Governor Christopher Waller described this as the challenge of \u201csignal extraction,\u201d where policymakers must differentiate between short-term tariff effects and more concerning long-term inflation.<\/p>\n\n\n\n<p>For investors, there are a lot of moving parts to consider.<\/p>\n\n\n\n<p><strong>Bottom Line for Investors<\/strong><\/p>\n\n\n\n<p>If I knew for certain that the Trump administration was going to levy 25% across the board, tariffs on all imports for one year (for example) or commit to implementing a \u2018reciprocal tariff policy\u2019 indefinitely, I could assign a much higher probability to near-term rising inflation, rising long duration Treasury bond yields, an economic recession, and a bear market.<\/p>\n\n\n\n<p>The problem is that it\u2019s impossible to know how tariff policy will look tomorrow or at any point in the future.<\/p>\n\n\n\n<p>Tariffs could be more permanent, which may hit economic growth slightly but potentially be offset by pro-growth policies like tax cuts and deregulation. The Trump administration could also pull back on tariff policy as the downside risks become more acute, which I think would factor as a positive surprise for markets. Again, there is no way to know for sure.<\/p>\n\n\n\n<p>But now that recession fears have returned and are being telegraphed more frequently by major banks and financial media, I\u2019ve become more optimistic. When recession fears return, the wall of worry follows\u2014creating opportunities for positive surprises.<\/p>\n\n\n\n<p class=\"has-black-color has-text-color has-link-color wp-elements-3ea1bb0226b54d9c63ec4fe962c09063\"><a>That\u2019s why staying ahead of market shifts is critical. Our <\/a><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\"><span style=\"text-decoration: underline;\"><strong><em>March Stock Market Outlook Report<sup>3<\/sup><\/em><\/strong> <\/span><\/a><a>breaks down the risks, opportunities, and key signals to watch\u2014so you can make informed decisions.<\/a><\/p>\n\n\n\n<p>Inside, you\u2019ll find:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Asset allocation guidelines<\/strong> for today\u2019s market environment.<\/li>\n\n\n\n<li><strong>Expert forecasts<\/strong> for inflation, rates, and economic trends.<\/li>\n\n\n\n<li><strong>Industry tables and rankings<\/strong> to help you spot opportunities.<\/li>\n\n\n\n<li><strong>Buy-side and sell-side consensus<\/strong> insights at a glance.<\/li>\n\n\n\n<li>And much more!<\/li>\n<\/ul>\n\n\n\n<p>If you have $500,000 or more to invest and want to learn more about these forecasts, click the link below to get your free report today!<\/p>\n\n\n\n<p><strong><em><u><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\">FREE Download \u2013 Zacks&#8217; March Stock Market Outlook Report<\/a><\/u><\/em><\/strong><em><u><sup><a href=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\" data-type=\"link\" data-id=\"https:\/\/go.steadyinvestor.com\/arrow-stock-market-outlook?source=website&amp;medium=blog&amp;term=motm_blog_2025_03_24&amp;content=stock_market_outlook_report\">3<\/a><\/sup><\/u><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Economic and trade policy uncertainty, reductions in the federal workforce, and declining household financial sentiment all increase worries about a recession ahead.<\/p>\n","protected":false},"author":3,"featured_media":13568,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-13690","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13690","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=13690"}],"version-history":[{"count":3,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13690\/revisions"}],"predecessor-version":[{"id":13693,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/13690\/revisions\/13693"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media\/13568"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=13690"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=13690"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=13690"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}