Risk of recession at its highest level in six months, given Trump’s fiscal policies

Fund managers, strategists and analysts predicted slower economic growth with increased inflation risk. They expressed that the probability of a recession rose to 36% from 23% in January. 

In a recent CNBC Fed Survey, fund managers, analysts, and strategists raised the risk of a recession to a six-month high. They cut their economic growth forecasts, citing increased policy uncertainty. 

Survey indicates recession risk is on the rise amid slow economic growth 

The survey indicated that fund managers, analysts and strategists believed inflation was rising. The 32 survey respondents expressed that the possibility of recession had increased from 23% to 32% in January. 

Survey finds that the probability of a recession rose to 36% from 23% in Jan.: "Much of the change appears to stem from concern over fiscal policies from the Trump administration, especially tariffs, which are now seen as the top threat to the US economy" https://t.co/QL5THYtpls

— Chris Lu (@ChrisLu44) March 18, 2025

In the January survey, they had dropped the recession probability to a three-year low. The Respondents’ stance reflected the general optimism that followed Trump’s win in the Presidential elections in 2024. 

Barry Knapp of Ironsides Macroeconomics commented that they had discussions with investors who were concerned about Trump’s agenda. He speculated that the president’s agenda had gone off the rails and was causing more harm. Knapp pointed out that the recent trade tariffs against Canada, China, and Mexico caused ripples across markets. He said the economic risks of something more insidious than a soft patch are growing. 

John Donaldson, director of fixed income at Haverford, said the degree of policy volatility was unprecedented. The respondents also reduced the gross domestic product(GDP) forecast for 2025 from 2.4% to 1.7%. They recorded three consecutive increases in previous forecasts during the last six months.

Neil Dutta, head of economic research at Renaissance Macro Research, said the risk to consumers’ spending was headed to the downside. He explained that with the frozen housing market and less spending across state and local governments, there was a downside to current estimates of 2025 GDP.

Survey indicates that market players believed the Fed would cut rates in 2025 

Most of the respondents expressed that they believed the Fed would cut its interest rates at least twice in 2025. They predicted the Fed would not hike its rates even when faced with weaker economic growth. 

Three-quarters of the respondents predicted two or more quarter-point cuts this year. They expressed that the tariffs would result in one-time price hikes and not lead to inflation. The survey indicated that 19% believed the Fed would not cut its rates. 

Bleakley Financial Group Chief Investment Officer Peter Boockvar said that Fed Chair Powell was stuck because of the tariff issue. He added that if the chair decided to focus on the growth aspect and cut rates, unemployment rates would increase. The CIO also expressed that in the event that  Trump removes all the tariffs, the rate cuts will be unmerited. 

The survey revealed that more than 70% of the respondents believed that tariffs were bad for inflation, jobs, and growth. It indicated that 34% predicted that the tariffs would decrease US manufacturing by 22% and would have no effect on the economy. 

The survey also indicated that 37% of the respondents believed that the tariffs would increase manufacturing output. It also revealed that 70% believed the Department of Government Efficiency’s (DOGE) effort to reduce government spending was bad for jobs and growth and would be slightly deflationary. 

Mark Zandi, Chief Economist at Moody’s Analytics, commented that a global trade war, haphazard DOGE cuts to government jobs and funding, immigrant deportations, and dysfunction in Washington threatened to push the economy into recession later this year. 

He pointed out that inflation might have cooled in February and insisted that Trump’s policies were headed in the wrong direction. He estimated that the tariffs would cost an average American household over $1250 a year. 

He expressed that the economic uncertainty caused by the policies damaged the US economy and caused reduced investor confidence in markets. Zandu said it was time for American citizens to be more prudent in spending as they braced themselves for the looming recession.

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