(Bloomberg) -- Financial markets are signaling that the risk of a recession is growing as tariff-related uncertainty and indicators of economic weakness spread fear across Wall Street.
A model from JPMorgan Chase & Co. shows that the market-implied probability of an economic downturn has climbed to 31% on Tuesday, from 17% at the end of November. Key indicators like five-year Treasuries and base metals are showing an even higher — toss-up — chance of a contraction. While it’s far from the base case, a similar model from Goldman Sachs Group Inc. also suggests recession risk is edging up, at 23% from 14% in January.
After a wild ride in markets Tuesday, economic sentiment is darkening as money managers and corporate executives struggle to cope with the volatility created by President Donald Trump’s threatened tariffs. Trump defended his plan to remake the global trading order in his address to Congress Tuesday night, acknowledging the prospect of discomfort ahead.
“With softer economic activity data in the US and already weaker business and consumer confidence in recent weeks, the tariffs that came into effect on March 4th on Canada, Mexico and China are raising the risk of an even bigger hit to business and consumer confidence going forward,” said JPMorgan strategist Nikolaos Panigirtzoglou. “In turn this raises the specter of a US recession and markets have naturally priced in higher probability.”
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A model from JPMorgan Chase & Co. shows that the market-implied probability of an economic downturn has climbed to 31% on Tuesday, from 17% at the end of November. Key indicators like five-year Treasuries and base metals are showing an even higher — toss-up — chance of a contraction. While it’s far from the base case, a similar model from Goldman Sachs Group Inc. also suggests recession risk is edging up, at 23% from 14% in January.
After a wild ride in markets Tuesday, economic sentiment is darkening as money managers and corporate executives struggle to cope with the volatility created by President Donald Trump’s threatened tariffs. Trump defended his plan to remake the global trading order in his address to Congress Tuesday night, acknowledging the prospect of discomfort ahead.
“With softer economic activity data in the US and already weaker business and consumer confidence in recent weeks, the tariffs that came into effect on March 4th on Canada, Mexico and China are raising the risk of an even bigger hit to business and consumer confidence going forward,” said JPMorgan strategist Nikolaos Panigirtzoglou. “In turn this raises the specter of a US recession and markets have naturally priced in higher probability.”
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