There are growing fears that the United States, the world’s largest economy, could be headed toward a recession, which is raising concerns of a possible stock market crash. The warning comes from Justin Wolfers, a professor of economics and public policy at the University of Michigan.
According to him, President Donald Trump’s “chaotic” tariff policies are harming business confidence and creating a level of uncertainty that hasn’t been seen since the pandemic. Wolfers stressed that this uncertainty is serious enough to make the once-strong economy vulnerable to a slowdown.
Wolfers believes that businesses are struggling to predict the future, which is why many are holding back on making investments. He also expressed concerns over layoffs in the public sector, citing recent actions by the Department of Government Efficiency (DOGE), which tech mogul Elon Musk is leading.
These moves have added to the uncertainty, making business leaders cautious about their plans in the coming months or years. Due to this unpredictability, companies are now more inclined to wait rather than make new investments, according to him.
Recession concerns have been growing, and the situation has become serious enough to prompt direct questions to President Trump. When asked about the possibility of a recession during a Sunday Fox News interview, Trump acknowledged that the economy was going through “a period of transition.” Treasury Secretary Scott Bessent also added that the Trump administration’s reduction in federal spending might lead to what he referred to as a “detox period” for the economy.
Oliver Brown, chief economist at the Pragmatic Policy Group in San Francisco, further pointed out that many sectors of the U.S. economy are struggling. He explained that businesses are facing massive uncertainty about their supply chains, with disruptions coming from Mexico, Canada, China, and other parts of the world.
Brown also highlighted the situation in Washington DC, where public sector layoffs are leading to fewer people with paychecks and less money being spent at local shops. This lack of consumer spending is another sign of the economic challenges facing the U.S.
Talk of a potential recession is starting to reflect in the stock market as well. A recession is often defined as two consecutive quarters of negative economic growth, usually measured by Gross Domestic Product (GDP).
However, in the U.S., recessions are officially declared by the National Bureau of Economic Research (NBER) when there is a significant and widespread decline in economic activity lasting for months. With increasing uncertainty around business operations, fiscal constraints, and hesitant consumers, many economists are now predicting that the U.S. is heading into a recession.
The growing unease in the market has caused a sharp rise in Wall Street’s VIX, known as the “fear” index, which saw a near 20 percent increase overnight. The VIX reached 27.86, reflecting the heightened levels of market anxiety. As a result, the stock market suffered a major sell-off, with the benchmark S&P 500 index dropping by 2.7 percent to 5,615 points. The tech-heavy Nasdaq also slumped by 4 percent to 17,468 points.
Tesla saw the most significant drop on the S&P 500, falling 15.4 percent to $222.15. Other major tech companies such as Microchip Technology and Palantir Technologies also saw declines of more than 10 percent. Even companies that had previously been seen as market darlings, like Nvidia, lost over 5 percent, along with Alphabet, Meta, and many other well-known tech names.
The losses extended beyond just tech companies, with major banks like Morgan Stanley and Goldman Sachs seeing drops of 6.4 percent and 5 percent, respectively. Airlines, including United and Delta, saw their stock prices fall by 6.4 percent and 5.5 percent, and industrial firms like Boeing dropped by 3.9 percent.
This market instability isn’t limited to the U.S.; it has also affected global markets. In Australia, the ASX 200 index was down by 1.6 percent, reaching 7,839 points by early afternoon. The volatility has even spread to Japan, with the Nikkei index down by more than 2 percent during early trade.
As recession fears continue to rise, the financial markets are showing signs of strain. The outlook remains uncertain, and investors are taking a cautious approach in the face of unpredictable economic conditions. Whether or not the U.S. officially enters a recession remains to be seen, but the growing concerns are already significantly impacting the stock market and global economic sentiment.
Disclaimer: This article has been meticulously fact-checked by our team to ensure accuracy and uphold transparency. We strive to deliver trustworthy and dependable content to our readers.
