In a recent New York Times op-ed, Dr. Justin Wolfers, a professor of economic policy at the University of Michigan, argued that recession fears in the U.S. are overblown.
Wolfers took issue with a recent projection from the Federal Reserve Bank of Atlanta, which suggested the economy was on track to shrink this quarter. According to him, the Atlanta Fed’s model “doesn't actually tell us much.”
The Atlanta Fed later walked back its stance, attempting to tamp down recession fears. But in today’s hyper-polarized climate, the projection was quickly politicized.
Democrats pointed to it as proof of economic struggles under President Trump, while pro-Trump pundits “then pinned the blame for the recession that isn’t yet happening” on former President Biden.
Wolfers outlined two reasons why a recession isn’t imminent: unemployment remains low, and the economy is fundamentally strong. “In the absence of solid evidence that the future will be worse, it’s usually best to keep predicting more good health,” he wrote.
A quick scan of the Times comments section paints a different picture.
One reader dismissed Wolfers’ optimism outright: “My 401(k) says otherwise.” Another noted a shift in spending habits, writing, “We’ve stopped buying anything except food and gasoline.”
And in a particularly dire prediction, one commenter warned, “I am fully expecting a Great Depression 1930s style.”
Whether this sentiment is just partisan noise or signals something deeper is an open question. Regardless of the hard data, for many Americans, the vibe feels off.
“The growth scare may have legs”
Morgan Stanley CIO Lisa Shalett addressed the shifting mood in a March 3 note to clients titled “Vibe Shift.”
After 28 months of “Magnificent Seven” dominance and a Fed-driven rally, Morgan Stanley’s narrative has shifted to one of normalization — expecting a “soft landing” where inflation cools, growth slows, but a recession is avoided.
“Recent economic data, however, has been surprisingly weak,” Shalett wrote.
“While some slowing was baked into the soft-landing thesis, policy uncertainty is causing some to contemplate stagflation. The consumer confidence reversal, with key metrics now below pre-election levels, has been particularly notable.”
She notes that Morgan Stanley maintains low odds of a recession happening this year, but “falling confidence and rising uncertainty indexes suggest greater short-term fragility.”
This means the “‘growth scare’ may have legs,” she added.
Euphoria has been replaced by confusion
One of the biggest drivers of this shift? Policy uncertainty under Trump.
His erratic approach to tariffs — imposing and reversing them at will — has fueled market volatility. Meanwhile, Elon Musk’s “Department of Government Efficiency” (DOGE) is wreaking havoc on federal agencies, creating confusion over economic policy.
Goldman Sachs, in a March 7 note, raised its recession odds from 15% to 20%, citing “policy changes as the key risk.”
According to Goldman analysts, if Trump backs off on tariffs, a recession could be avoided. But “if the White House remained committed to its policies even in the face of much worse data, recession risk would rise further,” Goldman Sachs wrote.
Wellington Management echoed this uncertainty in a recent report titled “The US Equity Rotation: Where Have All the Good Vibes Gone?”
Wellington strategist Nanette Abuhoff Jacobson noted that the “wave of election euphoria” following Trump’s victory has already faded.
“The general assumption at the beginning of the year was that he would talk big but act in a more measured way,” she wrote.
Instead, tariffs, federal employee firings, and DOGE-driven cost-cutting suggest Trump feels he has a mandate for more radical action — while pro-market policies like deregulation and tax cuts may come later.
It was the expectation of those pro-business policies that initially fueled optimism. Wall Street viewed Trump as a fix for the “bad vibes” of the Biden years when inflation peaked above 9% in 2022.
But now, many of the same economic concerns that rattled markets under Biden are resurfacing under Trump.
“It’s getting harder to make out the shape of the economy through the fog of Trump 2.0’s firings and tariffs,” Yardeni Research wrote on Monday. “Stock investors are confused and seem to have concluded that the economy may be falling quickly into a recession.”
Why “vibes” matter
This is why so many readers bristled at Wolfers’ op-ed. It doesn’t matter if the economy is technically strong — if it feels like things are getting worse, that’s what sticks.
Investors, in particular, serve as a real-time gauge of the national mood. Since hitting a record high on Feb. 19 — about a month into Trump’s presidency — the S&P 500 has dropped more than 10%.
The benchmark 10-year Treasury yield has fallen from above 4.8% to around 4.3%, while the US Dollar Index has weakened by 6%.
“US markets have rapidly transitioned from the two-dimensional bullish thesis of Federal Reserve easing and generative AI dominance, to worries about overheating and sticky inflation, to concerns about a growth scare or stagflation tied to rapidly changing Washington policy,” Shalett wrote in Morgan Stanley’s March 10 report.
She emphasized that the consumer confidence reversal — with key metrics now below pre-election levels — has been “particularly notable.”
Biden’s presidency serves as a case study in how vibes can outweigh economic reality.
Under Biden, GDP growth remained strong, consumer spending surged, and unemployment hit historic lows. Yet, his approval rating cratered to 36% as Americans felt financially squeezed.
Despite economic data suggesting the U.S. was “the envy of the rest of the world,” as CNBC put it, voters weren’t convinced. That’s why Trump is back in the White House.
But what happens if the bad vibes of the Biden years feel even worse under Trump? Can Americans talk themselves into a recession?
“Ultimately, a recession is a loss of faith,” Mark Zandi, chief economist of Moody’s Analytics, said last year. “Consumers lose faith that they’re going to hold onto their jobs and cut back spending.”
And when that happens, no amount of strong GDP prints or low unemployment numbers will change the way things feel.
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