Recession fears are rocking the stock market and driving down economic growth forecasts. The R-word is back — a scary word that signals significant economic hardship and uncertainty for businesses and consumers alike.
Recession fears have soared as global inflationary pressures mount and the Federal Reserve has continued to tighten monetary policy in response to high price levels. In addition, the uncertainty created by President Trump’s erratic trade policies and his frequent tariff threats has led to an increased sense of caution among Americans and investors.
In fact, a recent LendingTree survey found that nearly two-thirds of Americans think a recession is on the horizon. According to the survey, inflation, economic policy and tariffs are the biggest factors influencing consumer spending.
A recession is typically defined as a period of contraction in the economy, characterized by falling GDP and employment and slowing interest rates. Recessions are often triggered by a combination of events such as financial market volatility, geopolitical tensions and supply chain disruptions that cause people to pull back on their spending.
However, it’s worth noting that previous recession scares have been, with the benefit of hindsight, way overblown. During the COVID-19 pandemic and in early 2022, many consumers and economists were sounding the recession alarm, but the economy proved resilient and shook off those fears.