The recent downturn in the stock market has sparked concerns about a potential recession under President Donald Trump’s economic policies. Despite Treasury Secretary Scott Bessent downplaying the situation, investors are warning of a “vibecession” turning into an actual recession.
Mark Zandi, chief economist at Moody’s, says sentiment is on its back heels, with business surveys, consumer surveys, and market performance all indicating a decline in investor confidence. The S&P 500 has entered a correction, falling 10% from its peak, and strategists are lowering their year-end price targets due to increased economic uncertainty.
Zandi warns that the economy’s dependence on consumer spending, particularly among well-to-do investors, means that if the stock market continues to decline, they may pull back on spending, leading to a broad economic downturn. This sentiment is echoed by RBC strategist Lori Calvasina, who lowered her year-end S&P 500 price target to 6,200 from 6,600.
Ed Yardeni also lowered his “best-case” year-end price target for the S&P 500 to 6,400 from 7,000, citing heightened economic uncertainty as a reason for stock valuations to decline. Strategists at Goldman Sachs have increased their recession probability to 20% and predicted that Trump’s proposed tariffs could push the US into a recession.
Trump’s tariff threats are seen as a major risk factor, with America’s tariff rate potentially surging to levels not seen since the 1930s. However, if a deal is reached to avoid a trade war, Trump may pivot and clear up some of the uncertainty plaguing markets. The real risk for Trump is being rejected at the polls in 2026, which could cost Republicans their majorities in both the House and Senate.
Zandi concludes that ignoring the darkening economic vibes is “dangerous” from both an economic and political perspective, and predicts that Trump will relent to avoid a recession. With the 2026 midterms looming, investors are watching for any signs of change in Trump’s approach to economic policy and trade relations.
Source: https://www.businessinsider.com/trump-economy-stock-market-crash-wealth-effect-trade-tariffs-doge-2025-3