It’s coming

As we approach the release date of the 1Q25 GDP, more and more economists and C-level executives are coming out saying they see a recession this year, potentially estarting on the second quarter. In the chart below, you can see the probability of a recession implied by a set of indicators. The numeric outcome is mostly irrelevant, because recessions tend to be a binary event, and these indicators can move rather quickly. The important part is that some of them are starting to discount economic stress in less than 12 months with increasing odds. At this point, even if China agrees to everything the U.S. puts on the table, which is unlikely, we may have a recession, simply because the threat of tariffs has discouraged a lot of exports into the U.S., and will likely push prices up (supply shock). The good news is that a recession, if induced and managed correctly, can be used to clean the excesses in several dimensions (spending, valuations, etc) and provide the breeding ground for the new cycle. But we still need to go through some pain. In terms of markets, over the last 17 years, investors have “learned” that buying every dip is a great strategy, because the equity market moves in V-shape. We’re going to test that narrative over the following months.

Want to know more? You can find all our posts at https://www.myfundamental.net/insights

#iamfundamental #soyfundamental #wealthmanagement #familyoffice #financialadvisor #financialplanning

#policymistake #ratecut #stagflation