The recent downturns in the U.S. stock market prompt reflection on whether they may signal more serious turbulence ahead. In recent years, the topic of recession seemed to diminish in importance in economic debates. However, despite optimistic macroeconomic data for 2025, such as stable GDP growth in the United States, it is worth considering whether increasing confidence could lead to complacency, potentially contributing to unexpected difficulties.
The labor market represents one potential flashpoint. Although unemployment remains at a low level, its slow growth, combined with persistent high inflation, could weaken consumer purchasing power. This, in turn, could lead to a decrease in consumption, a key pillar of the economy. The so-called negative wealth effect also raises concernsâif stock and property prices stop rising, consumers might reduce spending, which would slow economic momentum. Additionally, restrictive immigration policies and a natural decline in the labor supply could limit economic growth opportunities in the long term.
The economic policy conducted by the administration of Donald Trump provides further reasons for concern. Tax cuts, public spending reductions, and a protectionist trade approach may, contrary to expectations, weaken the economy. The think tank NIESR estimates that these changes could reduce GDP growth by 1.25% in the first year of their implementation, while also increasing inflation. A reduction in government spending means less support for the economy in case of a slowdown, potentially increasing vulnerability to crises.
Financial markets also send warning signals. Goldman Sachs predicts a weak decade for stock exchanges, with real returns below 3%. This suggests that even with stable economic growth, investment results could be moderate, which could affect consumer and investor sentiment.
Special attention is warranted for the yield curve, which has historically often signaled recessions. After an inversion observed from mid-2022 to September 2024, the curve has returned to a normal slope, and long-term interest rates have risen. Although most analyses, such as the FactSet study, do not predict a recession in 2025, and Goldman Sachs assesses its probability at just 15%, history teaches that ignoring warnings can lead to a lack of preparation for sudden changes.
While the current economic fundamentals of the United States seem solid, it is crucial to avoid excessive complacency. Monitoring the labor market, economic policy, financial market conditions, and the shape of the yield curve remains indispensable. Even if a recession seems distant today, caution and analysis of warning signals are necessary to avoid the costly consequences of being caught off guard. Solid fundamentals are no guarantee of immunity to future crises.
Author: Krzysztof KamiĆski â Oanda TMS Brokers