The Big Recession Question: Why Americans Increasingly Believe a Downturn is Inevitable

What is a Recession?

When we hear the word “recession” a host of emotions are conjured up. We anticipate layoffs and hiring freezes — shopping less and becoming more price sensitive. We think about postponing those faraway vacations and staying closer to home. And we prepare for that general economic malaise as anxiety about money, savings, spending and affordability hits a fever pitch.

Those old enough to remember the recession of the 1970’s and 1980’s recall rising food prices, gas shortages, sky-high interest rates, and soaring unemployment. While those who recall the 2008 subprime mortgage crisis and recession will never forget the market crash, loss of wealth, housing collapse, foreclosures, and pronounced economic hardship.

According the International Monetary Fund, there is no “official definition” of a recession but it is generally recognized as two consecutive quarters of decline in GDP, which is the value of all goods and services that a country produces.¹https://www.imf.org/external/pubs/ft/fandd/basics/recess.htm

According to TD Waterhouse, signs of an economic recession include the following:

Decline in consumer confidence:

In a volatile economy, consumer confidence typically becomes shaky. This may be the result of a variety of contributing factors, but the key ones are often: high inflation, rising interest rates, layoffs and a general sense of economic uncertainty. When consumer confidence declines, spending slows and the economy follows suit.

Sudden declines in the stock market:

Whenever consumer spending is slowing, corporate profits may also be falling. This can lead to a decline in investor confidence, which can cause stock prices to fall. As stock prices soften, investor concern may grow, prompting further stock sell-offs.

Layoffs:

Layoffs are both a consequence and an indicator of economic decline. As companies tighten their belts in response to lower consumer spending and economic volatility, employment is often negatively affected. Similarly, when people lose their jobs, they slow their spending as much as possible to make up for their loss of wages.

Inverted yield curve: In a typical non-recessionary economy, the yields (or interest paid) on long-term government bonds are generally higher than those on short-term bonds. This is because investors expect to be compensated for additional risk when purchasing longer-term bonds. When investors become pessimistic about the near-term outlook for the economy, they expect higher yields for shorter-term bonds versus longer-term bonds. This causes the yield curve to flip. This observed pessimism among investors can often be a precursor to a recession.²https://www.td.com/ca/en/investing/direct-investing/articles/what-is-recession

The Sentiment Crisis

According to the latest forecasts, experts are split on the odds of a recession. In March of 2025, JP Morgan increased the risk of recession from 35% to 40%, while Moody’s bumped it from 15% to 35%.  U.S. job growth has been relatively steady, but the Trump administration’s tariff and trade policy has created widespread economic uncertainty and volatility that could impact growth.

According to the University of Michigan, U.S. consumer sentiment fell to 52.2 in April — from 57 in March. In addition, survey respondents expect prices to jump 6.5% over the next year, which is the highest reading in 44 years.³https://www.wsj.com/economy/consumers/consumer-sentiment-university-michigan-april-2025-008b1b93

The mood among U.S. businesses is no better as JP Morgan is warning of a similar drop in business optimism.

“At the start of the year, U.S. business sentiment surged following the election. However, the uncertainty associated with tariff increases and the general thrust of the Trump administration’s policies are now depressing business sentiment, which will directly weigh on spending and hiring.”⁴https://www.jpmorgan.com/insights/global-research/current-events/us-tariffs

These factors impact financial conditions, investment and overall economic activity — and when they weaken, the risk of recession rises. According to U.S. financial services firm Morningstar, experts are forecasting Q1 GDP to either slow to a crawl or indicate a contraction.

“Economists’ forecasts for growth in the first quarter of 2025 predict a significant slowdown, including the potential for an outright decline, likely driven by a surge in imports as US firms stocked up on inventory to get ahead of the levies. FactSet’s consensus estimates show

that economists expect 0.8% growth, down from 2.4% growth in the fourth quarter of 2024. A widely watched model from the Federal Reserve Bank of Atlanta, recently adjusted to account for unusual gold import numbers, is now pointing to negative 0.4% growth for the first quarter. Economists from Goldman Sachs expect negative 0.2% growth, while Bank of America economists expect 0.4% growth.”⁵https://www.morningstar.com/economy/sharp-slowdown-gdp-growth-expected-first-quarter-imports-surge

The Strategic Safe Haven

Wall Street’s jitters, waning sentiment among consumers and businesses, surging job cuts and yield curve indicators pointing to an imminent recession — all fuel demand for safe haven assets. Safe havens are investments that retain their value during economic upheaval while some can even increase or surge in value.

Traditional safe havens include cash, real estate, treasuries, defense stocks and of course gold. In 2025, gold has proven to be the top performing safe haven. It is, according to Barron’s, “a light in the investing darkness” and it is quite simply “Beating Everything.”⁶https://www.barrons.com/articles/buy-gold-price-investing-portfolio-9f97260c As of this writing, gold is up over 24% on the year and almost $670/oz since January.

According to FTSE Russell, a subsidiary of the London Stock Exchange Group, —gold’s role in the modern portfolio is tactical, multipolar and extremely vital.

“For investors, this research shows that gold is becoming more important in today’s uncertain world. As deglobalisation and geopolitical tensions rise, and inflation stays sticky, traditional assets like equities and bonds are becoming more correlated, making it harder to diversify. Gold stands out as a stable, independent asset that holds value during market stress. Central banks, investors, and even tech sectors are increasing demand for gold. For multi-asset portfolios, adding gold can help smooth returns, protect capital, and offer resilience when other assets struggle. It’s no longer just a safe haven; it’s a strategic choice.”⁷https://www.lseg.com/en/ftse-russell/research/gold-in-a-fragmented-world-safe-haven-and-strategic-asset

As investors remain nervous about ongoing trade wars, market volatility, retaliatory tariffs and the strength of the U.S. dollar — gold’s path to $4000/oz becomes clearer and clearer by the day.

 

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1. https://www.imf.org/external/pubs/ft/fandd/basics/recess.htm

2. https://www.td.com/ca/en/investing/direct-investing/articles/what-is-recession

3. https://www.wsj.com/economy/consumers/consumer-sentiment-university-michigan-april-2025-008b1b93

4. https://www.jpmorgan.com/insights/global-research/current-events/us-tariffs

5. https://www.morningstar.com/economy/sharp-slowdown-gdp-growth-expected-first-quarter-imports-surge

6. https://www.barrons.com/articles/buy-gold-price-investing-portfolio-9f97260c

7. https://www.lseg.com/en/ftse-russell/research/gold-in-a-fragmented-world-safe-haven-and-strategic-asset