Is the U.S. already in a recession? What you need to know

The question on everyone’s mind lately is: Are we officially in a recession? As economic uncertainty continues to swirl, fueled by President Trump’s actions and growing fears about a global economic slowdown, many experts believe the U.S. economy is already in the midst of a downturn. But how accurate is the threat of a recession, and how should we think about the next few months in the market? Let’s dive in.

The tariff effect: The spark for market fears

It all started with tariffs. When President Trump unveiled his sweeping tariff plans, many hoped it would strengthen the U.S. economy by reducing the trade deficit. Instead, the tariffs have ignited market instability, triggering fears of an economic slowdown not just in the U.S. but globally.

Larry Fink, the CEO of BlackRock, made waves recently by suggesting the U.S. could already be in a recession. He’s far from alone in his assessment. According to a survey by CNBC, 69% of CEOs believe a recession is either already here or imminent. This growing consensus has sparked a wave of concern among investors and economists alike, leading to calls for caution in the market.

Is the U.S. already in a recession?

While we might not have the official numbers yet, there’s a strong argument that we could already be in a recession. Larry Fink and other industry leaders point to mounting signs of economic stress, with Goldman Sachs raising the likelihood of a U.S. recession to 45%-up from 35% the week before. 

For context, a recession is often characterised by two consecutive quarters of negative GDP growth, rising unemployment, and other economic indicators. 

While the official declaration may take time, the signals are already loud and clear: the U.S. economy is weakening. Many experts believe that we might be in the early stages of what could become a deeper recession.

Recession fears aren't just U.S.-Centric

The current downturn isn't just a U.S. phenomenon. Global markets are also feeling the pressure. President Trump’s tariff policies have rippled worldwide, with China and the European Union announcing countermeasures. This growing trade war has made traders nervous, and global growth projections have been downgraded.

JPMorgan’s CEO, Jamie Dimon, also warns that the U.S. economy could face even more struggles. While some believe the tariffs could eventually be beneficial in the long run, Dimon and other experts argue that they’re more likely to harm the economy in the short term by raising prices and stalling economic growth.

A look ahead: How could this play out?

With all this uncertainty, it’s natural to wonder what the future holds. Will we see a continued downturn? Or is this just a short-term blip in an otherwise resilient economy?

The case for a short-term drop

As mentioned earlier, Larry Fink has cautioned that we could see another 20% market drop before things settle. Given the current market volatility and the potential for tariffs to hurt U.S. economic growth, a short-term pullback is within the realm of possibility.

The idea of a 20% drop has spooked many, but it's worth noting that recessions-while painful-are part of the economic cycle. Even if a downturn is in progress, it might not necessarily lead to a severe long-term crash. Many market veterans view the current pullbacks as a natural correction rather than a precursor to something much worse.

A recession could push the Fed into action

If the U.S. economy does enter a full-fledged recession, the Federal Reserve will likely take steps to ease the pain. Markets are already pricing in interest rate cuts as early as this year, with some expecting three more cuts in 2025.

A rate cut could provide much-needed relief to consumers and businesses, but it could also signal an economy in a more fragile state than previously thought. The dollar could lose its edge as interest rates drop, especially as other global currencies look more attractive. This is something to watch closely, especially if you’re involved in international trade or investment.

The long-term outlook: Recovery after the storm

While the short-term outlook for the U.S. economy is bleak, history tells us that recessions tend to follow a cycle. Once the pain of the downturn is over, economies usually recover- albeit slowly.

The key question for many investors and economic strategists will be: how deep will this recession go? And how long will it take for recovery to take hold? While it’s hard to say with certainty, there are a few things to consider:

• Trade Policies Will Continue to Shape the Future: As long as trade tensions remain high, the U.S. economy will face headwinds. The longer-term question will be whether trade deals or diplomatic resolutions can stabilize the global economy.
  
  
• Global Economic Integration: The world is more interconnected than ever, so a downturn in the U.S. economy will affect markets globally. However, as other economies adapt and evolve, the recovery could come from overseas, with regions like Asia and Europe potentially leading the charge.
  
  
• Technological Advancements and Innovation: During past recessions, innovation has often driven recovery. Whether in tech, energy, or new industries, fresh breakthroughs could pull the economy out of a slump—if businesses and governments take the proper steps.
  

Technical outlook: Is the U.S. in a recession or just headed toward one?

According to experts, the signs are there. Traders must stay informed and flexible as the market reacts to economic signals. The volatility of the next few weeks could be challenging, but it also presents opportunities as currencies and assets fluctuate. If the dollar continues to lose its strength, it could significantly shift the global currency landscape if other economies recover before the U.S. does.

At the time of writing, EURUSD is inching up as the Euro gains on the dollar. The daily chart has some upward pressure bias as prices remain above the moving average. However, prices inching toward the upper Bollinger band hints at overbought conditions. Key levels to watch on the upside are $1.1057 and $1.1148, while on the downside, the levels to watch are $1.0891 and $1.0796.

You can speculate on the price trajectory of the EURUSD pair with a Deriv MT5 or Deriv X account.