Recession fears are a major driver of global markets. They influence investor decisions, which can have significant impacts on economies. Recessions have been blamed for a range of market crashes and business downturns (such as the Great Depression, the bursting of the housing bubble, and the COVID-19 pandemic). However, no consensus exists on what causes recessions. Recessions can be triggered by unexpected events, such as the COVID-19 pandemic or a war. They can also be caused by a bursting asset bubble or over-inflation. The US has experienced 34 recessions since 1857, with durations ranging from just two months (the COVID-19 recession) to over five years (the Great Recession).
In the days following President Trump’s announcement of new tariffs, searches for “recession” on Google have spiked and economists at prominent investment banks have raised their odds of a downturn. Investors have been spooked as the stock market plunged and consumers may be slowing spending if they are worried about rising prices and higher unemployment.
A number of economic warning signals are flashing, including a slowdown in consumer spending, accelerated inflation, and a resurgent trend toward layoffs. Moreover, some investors are starting to fear that Canada’s imposition of a 25% surcharge on electricity sold to the U.S. could escalate into a full-blown trade war. While these worries are valid, the fact is that there are still many reasons to believe a recession is not imminent. The fact is that while the economy will likely slow this year, Goldman Sachs expects it to do so in a healthy way.
