In a shocking revelation from the March CNBC Fed Survey, a substantial shift in economic sentiment has raised the risk of recession to a staggering 36%, up from just 23% just two months ago. This marks the highest level of concern we’ve seen in half a year. Interestingly, the once dominant issue of inflation has taken a backseat to concerns over fiscal policies, particularly the Tariff measures instituted during the Trump administration. The experts surveyed now consider these tariffs to be the main threat to the U.S. economy—a deviation from previous assessments that prioritized inflation.
This dramatic transformation in perspective can be attributed to a variety of factors that suggest the economy is wobbling, and quite precariously at that. After a brief lull of optimism following the election results, it appears we’ve returned to a climate of uncertainty, one where investors are anxiously glancing over their shoulders for looming threats that could derail what had been a relatively stable economic period.
Investor Sentiment: A Shift in Focus
Fund managers, analysts, and strategists are expressing growing unease over the potential repercussions of Trump’s trade policies, a sentiment echoed by Barry Knapp of Ironsides Macroeconomics. In his stark warning, he pointed out that the current economic discussions reveal a disturbing trend: people are growing increasingly apprehensive that the administration’s economic agenda is veering off course due to erratic trade policies.
The average GDP forecast for 2025 has plummeted from 2.4% to a mere 1.7%, a correction that underscores a collective acknowledgment of the impending risks lurking in the economic landscape. A survey conducted among 32 distinguished respondents indicates that while some predict a rebound to 2.1% in 2026, the immediate future remains fraught with vulnerabilities. Neil Dutta from Renaissance Macro Research encapsulated the sentiment perfectly: “The risks to consumers’ spending are skewed to the downside.” In simple terms, the collective predictions indicate an impending downturn that is fueled by reckless economic maneuvering rather than any previously acknowledged cyclical downturn.
A Tightrope Walk for the Federal Reserve
The Federal Reserve finds itself in a precarious position as policymakers attempt to navigate through tumultuous waters. Amid persistent speculation that the Fed will execute two rate cuts this year, there’s a palpable tension between maintaining economic stability and responding to the challenges posed by tariffs and slower growth. Over 70% of the survey respondents assert that tariffs are detrimental to the economy, with a notable percentage believing they neither stimulate manufacturing nor job growth.
The unsettling conundrum is best articulated by Peter Boockvar of Bleakley Financial Group, who suggests that Fed Chairman Jerome Powell is consistently grappling with the implications of the tariff-filled environment. If the Fed cuts rates only to find that the tariffs are removed and the economy magically improves, it could lead to extensive complications and backlash—an outcome that speaks to the fragility of our current situation.
The Risks of Policy Volatility
Concerns about the unpredictability of policies are further complicated by an overarching fear of a potential global trade war, cuts to government employment, and dysfunctionality in Washington D.C. With over 70% of respondents believing that such factors could derail what was once a thriving economy, the foundations of financial stability look increasingly shaky. Mark Zandi, chief economist at Moody’s Analytics, encapsulated this sentiment, asserting that the combination of an aggressive trade stance and governmental dysfunction threatens to plunge us into a recession.
As we stand at this crossroads, it’s imperative to recognize that while economic tides can shift and vary dramatically, the current trajectory presented by these statistics and sentiments paints a concerning picture. Far from the initial euphoria that followed the change in administration, we find ourselves confronting a harsher reality. This growing consensus of apprehension should prompt all of us—not just economists and investors—to consider the broader implications of fiscal policy, trade tariffs, and the ever-evolving landscape of the American economy. The path ahead requires thoughtful deliberation and strategic foresight, lest we plunge headlong into a crisis that could have dire consequences for everyday Americans.