Economic Concerns Rise as Trump Administration Refuses to Rule Out Recession

President Donald Trump and his top economic official's refusal to rule out a recession has sparked worry among investors and the public. Some economists caution that the economic policies of the Trump administration could potentially lead the U.S. into an unnecessary recession. The UCLA Anderson School of Management has issued a "Recession Watch" for the first time, with economist Clement Bohr criticizing Trump's policies. Mark Zandi, chief economist at Moody's Analytics, has also voiced concerns about the increasing risk of a recession under Trump's leadership.

The Trump Administration is alerting Americans to the potential of a recession, with President Trump and Treasury Secretary Scott Bessent not dismissing the possibility of an economic downturn. While official GDP figures have not shown negative growth yet, the Atlanta Federal Reserve's model predicts a potential -1.8% annual GDP growth in the first quarter of 2025. Wall Street indicators are pointing towards a higher likelihood of a recession, with major banks like JPMorgan Chase and Goldman Sachs adjusting their forecasts accordingly. Stock market volatility and worries about an economic slowdown have raised significant concerns among major money managers, with many expressing pessimism about the global economy in the upcoming year.

Concerns about the economy are increasing among major money managers, with 63% anticipating a global economic slowdown in the next year, representing the second largest surge in pessimism since 1994. Fund managers are shifting towards cash and moving away from U.S. stocks at a record pace, indicating a lack of confidence in American equities. Key risks identified include a trade war driven by tariffs and potential actions from Elon Musk's Department of Government Efficiency that could lead to a recession. The bond market is showing signs of instability, with a flight to government bonds reflecting a preference for safer returns amid fears of a recession. Consumer confidence is on the decline, as seen in the University of Michigan's consumer sentiment survey hitting its lowest level since 2022. Despite some weaknesses in the labor market, the unemployment rate remains at a healthy level. Gold prices are on the rise while oil prices are falling, suggesting a potential global economic slowdown. The Federal Reserve is unlikely to lower interest rates in the near future, focusing instead on clarity regarding tariff policies. Economists are warning of increasing risks of a recession, although a significant decrease in consumer spending is not expected.

David Mericle, chief U.S. economist at Goldman Sachs, has advised delaying any further rate cuts until there is more clarity on tariff policy, as stated in a note to clients on Sunday. Senior economist Lydia Boussour at EY-Parthenon has noted signs of economic weakness and growing risks of a recession, although a substantial drop in consumer spending is not anticipated. For more information, readers can refer to articles on Forbes such as "Calming Advice For A Chaotic Stock Market" by Hank Tucker and "Stock Market Comeback Erased: S&P 500 Sinks To 6-Month Low As Trump Says Don't 'Watch The Stock Market'" by Derek Saul.