JPMorgan Chase & Co. says recession fears in stocks acutely tied to America’s economy have spiked to nearly 80%, while credit investors remain sanguine even as funding stress threatens to build.
The small-cap focused Russell 2000, which has been battered in the recent selloff, is now pricing in a 79% chance of an economic downturn, according to JPMorgan’s dashboard of market-based recession indicators. Other asset classes are also sounding alarms: the S&P 500 is pricing in a 62% chance of an economic downturn, while base metals show a 68% chance and five-year Treasuries indicate a 54% chance. By contrast, recession odds in the investment-grade credit market are at just 25% — though that’s still up from zero in November.
“The Russell 2000, which as a more cyclical index should contain more information about the cyclical position of the US economy, prices in an average recession with high probability of almost 80%,” said JPMorgan strategist Nikolaos Panigirtzoglou. “A mild recession is almost 100% priced in.”
Economic sentiment is darkening as money managers and corporate executives struggle to cope with the volatility created by President Donald Trump’s escalating trade war. Equities on Tuesday reversed what was on track to be the biggest rally since 2022, after the White House said it would go ahead with tariffs of 104% on China. The S&P 500 fell almost 3%, leaving it flirting with a bear market.
JPMorgan calculates the prospect of an economic downturn by comparing the pre-recession peaks of various classes and their troughs during an economic contraction. One bullish implication for stocks is that the doom and gloom that’s already erased trillions of dollars from the asset class may have lowered the bar for a rebound fueled by better economic or policy news.
On the flipside, corporate bond markets have yet to price in the spiking probability of an economic downturn. If the trade war escalates, a credit drawdown would stress the broader financial system, tighten liquidity and threaten bankruptcies.
The US high-grade corporate bond market reopened Tuesday for the first time since the tariff announcement last week cratered credit markets.
“Corporate fundamentals are so strong that they make credit investors doubtful of a credit cycle emerging even in a weak GDP growth scenario,” Panigirtzoglou said. “Historically, credit markets were proven right most of the time.”
Economists have raised recession odds across the board. Some 92% of the forecasters who responded to a Bloomberg survey conducted April 2-3 said the imposition of sweeping levies raises the risk of a US economic downturn over the next 12 months.
JPMorgan’s team of economists, led by Bruce Kasman, hiked the odds of a global recession to 60% last week. The bank’s chief US economist, Michael Feroli, forecasts real GDP growth of -0.3%, down from 1.3% previously.
© 2025 Bloomberg L.P.
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