-
There’s a chance the US may not tip into recession this year, Wells Fargo said.
-
The bank said it sees “fertile ground” for an economic recovery in the second half of the year.
-
Strategists pointed to a handful of things that suggest the US can avoid a downturn in 2025.
President Donald Trump’s latest tariffs and the massive sell-off in stocks have ignited fears of an economic downturn in 2025 — but one bank says there’s still reason to believe that the US is not barreling toward a recession this year, after all.
Wells Fargo strategists on Tuesday said they’re seeing a handful of promising signs that the US economy may be able to avoid a downturn this year, despite heightened concerns on Wall Street amid the latest market chaos.
The bank said it lowered its expectations for US GDP growth this year but the hard economic data remained strong. It added that some of the economic weakness this year could be brushed off as “payback,” considering how strong the economy performed in 2024.
“However, key economic supports remain intact, in our view, and can limit the slowdown. We see fertile ground for a moderate second-half growth recovery,” strategists wrote.
Here are the four things that offer a glimmer of hope as uncertainty runs high:
Consumer spending has shown signs of slowing in recent months, but Americans who are spending less are supported by higher income growth. Inflation-adjusted disposable personal income has grown steadily in recent years, reaching a record high in the fourth quarter of 2024, according to Federal Reserve data.
Job growth also remains solid. The economy added a more-than-expected 228,000 payrolls last month, while the unemployment rate remained close to historical lows. The resilient job market is another factor that’s “cushioning” consumer purchasing power, the bank said.
Stocks were deep in correction territory last week, with the S&P 500 and the Nasdaq-100 being pulled into official bear market territory amid the broader market sell-off.
But household wealth was elevated before the sell-off, which has given Americans, especially higher-income Americans, some breathing room. US household net worth climbed to a record high of $160 trillion in the fourth quarter of last year.
“Past windfall gains in stocks and other financial assets are sufficient to propel upper-income spending, in our view, especially as pent-up demand builds into the warmer months,” Wells Fargo strategists said.
