Market Defies Gloom: Stocks Surge as Recession Fears Simmer

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Market Defies Gloom: Stocks Surge as Recession Fears Simmer

 

Despite persistent warnings from top economists about a looming recession, Wall Street continues its upward climb, with investors largely shrugging off tariff anxieties and placing faith in economic resilience. The S&P 500, after a sharp downturn spurred by the unveiling of new tariffs, has now regained significant ground, down just 3.3% for the year. Optimism around potential tariff rollbacks and a robust job market have fueled this rally, with the index recently completing a nine-day winning streak—its longest since 2004—gaining about 10% in that span.

 

Still, the optimism seems at odds with forecasts from some of the market’s most respected voices. Goldman Sachs estimates a 45% chance of a recession within the next year. Apollo Global Management’s top economist raised that alarm even louder, pegging the likelihood at 90%. “There’s zero chance of an economic slowdown priced in,” said Bob Elliott, chief executive of Unlimited Funds, suggesting the market may be overconfident.

Although President Trump has already scaled back some tariffs, the potential long-term effects of sustained trade levies—especially on Chinese imports—continue to concern economists.

 

The knock-on impact could ripple across consumer spending, business investment, and employment. “With the amount of uncertainty still out there, the equity market rallying back here feels like they’re whistling past the graveyard,” warned Tom Porcelli, chief U.S. economist at PGIM Fixed Income.

 

Investors are looking ahead to Federal Reserve Chair Jerome Powell’s upcoming remarks following the Fed’s May meeting for additional insight into the central bank’s economic outlook. Tariffs on Chinese goods pose a specific threat to the economy by potentially triggering stagflation—a toxic mix of rising prices and slowing growth.

 

Although consumer confidence and small-business optimism have both slumped according to recent surveys, spending habits have yet to show a major shift. In fact, a recent report indicated inflation-adjusted household spending jumped 0.7% in March, possibly due to pre-tariff buying. Visa reported no signs of a pullback in card spending through April 21. “I’m watching that credit-card data like a hawk because that will be one of the early warning signals,” said Larry Adam, chief investment officer at Raymond James. “I think we’re past peak uncertainty with tariffs and now we’re at peak uncertainty with the economy.”

 

Goldman Sachs economists recently projected that the effects of tariffs could take two to three months to manifest in inflation data, with a dip in consumer spending expected to follow. Reflecting growing concern, Vanguard has revised its forecast for U.S. economic growth this year down to below 1%, citing trade tensions and policy instability. It now anticipates 4% inflation by year’s end, up from an earlier projection of 2.7%. “The notion that we will just go back to where we were before without any disruption to the economy is certainly on the optimistic side,” said Kevin Khang, senior international economist at Vanguard.

 

While major tech firms with strong earnings have helped lift the overall market, other sectors tell a more cautious story. Defensive sectors like utilities and consumer staples are outperforming, while more economically sensitive areas such as energy and discretionary consumer goods are lagging. Meanwhile, traders in interest-rate futures are betting on at least three rate cuts from the Federal Reserve this year, signaling expectations that monetary policy will need to support a slowing economy. On Kalshi, a prediction market, the probability of a recession this year has jumped to 63%, up from about 40% in March.

 

Surprisingly, this stock rally has persisted even as the 10-year U.S. Treasury yield remains elevated—a benchmark that typically pressures equity valuations. Though the yield has dipped slightly since April, it remains relatively high compared to mid-March levels. The so-called “excess CAPE yield,” a measure of the reward investors receive for owning stocks instead of Treasurys, stood at just 1.8% at the end of April. That’s roughly half the 50-year average, barely higher than March’s 1.7%, and still below levels seen last September.

 

  Adpated by ASEAN Now from Wall Street Journal  2025-05-05

 

 

[Cryingdick]

The stock market being up isn't surprising i have been banging the table for a couple of weeks saying this was near to a generational buying opportunity. That said it can't go parabolic forever. So if you did well maybe look at your holdings and take some off. 

[JonnyF]

The MSM won't be happy.

 

Stocks up, job market up. It's almost like Trump's policies are working. 😃

 

Like I said before, the only people who get hurt on a rollercoaster ride are the mugs who get off half way round. 

[FlorC]

I'd wait for the 3 month tariff pause is over.

[Harrisfan]

Lefties always have an angle to complain. Bunch of losers.

[JonnyF]

1 hour ago, Harrisfan said:

Lefties always have an angle to complain. Bunch of losers.

 

The irony is that most old lib lefty Yank pensioners on the forum haven't got a pot to pee in let alone a window to throw it out or any money in the stock market. 

 

If cheap Charlies pattaya branch started charging for WiFi they'd disappear from the forum.