Recession Warning: Why Markets May Be Missing the Bigger Risk

​Wall Street may be riding a tariff-fueled roller coaster, but one thing it hasn’t fully priced in yet? A potential recession. And that blind spot could prove costly.

According to Daniel von Ahlen at GlobalData TS Lombard, investors are dangerously underestimating how close the U.S. economy might be to slipping into contraction. In a recent report, he outlined a series of economic warning signs that are building beneath the surface—even as the stock market shows flashes of optimism.

Among them: slowing income growth, weakening hiring trends, and upcoming federal layoffs. Add in Trump’s new tariffs, which are expected to drive prices up and crimp purchasing power, and the picture starts to look a lot less stable.

Von Ahlen also pointed to China’s retaliatory moves—like halting Boeing jet deliveries—and Trump’s planned spending cuts tied to his tax extension push, which could remove another layer of economic support.

“Collectively, these factors could be powerful enough to push the U.S. economy into recession,” he warned, especially with real income growth cooling fast and leaving households more vulnerable.

The kicker? Market expectations are still pricing in strong growth, even as Wall Street economists quietly revise forecasts lower. Many analysts are still projecting nearly 9% earnings growth in 2025—a pace that rarely holds during a recession.

Von Ahlen isn’t alone. Pepperstone’s Michael Brown echoed the concern, pointing to persistent trade uncertainties, supply chain risks, and a lack of progress on de-escalating tariffs. “We’ve yet to fully discount either the upside inflation or the downside growth risks,” he said.

So how should investors prepare? Von Ahlen recommends rotating into defensive sectors like utilities and buying long-dated inflation-protected bonds. He also suggests a tactical currency play: shorting the peso and going long the Japanese yen, a classic safe-haven hedge.

​Bottom line: Wall Street might still be betting on a soft landing—but if these recession risks are right, that bet could soon go sideways.