Concerns about a potential recession are growing among investors and economists. Prominent bears, such as David Rosenberg, believe that a downturn could emerge as early as July. Four warning signs have been flagged by economic forecasters, including deteriorating household finances, struggling small- and mid-cap stocks, weakening company earnings guidance, and rising bond market risks.
US households are showing signs of struggle, with 63% of Americans unable to cover an emergency expense, according to the latest Survey of Consumer Expectations. Household debt has also risen to a record $18 trillion. Small- and mid-cap stocks are doing poorly, with the iShares S&P Small-cap 600 Value ETF down 16% from its peak in November.
More companies are warning investors that guidance for earnings this year is looking weaker than anticipated. Companies like Walmart, Target, and FedEx have slashed their guidance, citing uncertainty around new policies and tariffs as a reason. The bond market is also pricing in higher risks, with credit spreads rising substantially over the past month.
These warning signs suggest that the economy may be weakening. According to Rosenberg, it’s not just the level of unemployment that matters, but rather the pace of change. He believes that a recession could strike in the next few months. The Conference Board’s latest Consumer Confidence Survey shows that consumers expect a recession in the next 12 months at a nine-month high.
Goldman Sachs has also raised its probability of a recession over the next 12 months from 15% to 20%. Bank of America’s March survey found that 55% of fund managers believe a global recession triggered by a trade war is the top tail risk for the market.
Source: https://www.businessinsider.com/recession-2025-warning-economy-outlook-growth-slowdown-debt-stocks-rates-2025-3