Bullish indicating open at $55-$60, IPO prices at $37
Investing.com -- A U.S. recession could become unavoidable if tariffs remain in place without relief for another four to six months, according to Wolfe Research.
In a new client note, the firm estimated that current tariffs are significant enough to drive the economy into recession within nine months under a no-negotiation scenario.
Wolfe’s base case assumes that 30% of the tariffs are negotiated down, which would avoid a recession by year-end. But that outlook depends on talks progressing.
“Investors have recently been asking at what point so much damage has been done that recession is inevitable. Our sense is 4–6 months without negotiation or relief,” strategists led by Stephanie Roth said.
They also highlighted that the damage is not limited to tariffs, with financial conditions having tightened notably in recent months.
As of April 4, the cumulative impact of market weakness represents a 50 basis point drag on GDP growth compared to the start of the year.
While some short-term price pressures are being mitigated by inventories, the strategists cautioned that second-order effects—such as falling investment due to uncertainty—are likely to intensify after one quarter.
To reflect the recent tariff announcement, Wolfe has cut its GDP growth forecast from 1.6% to 0.6% and raised its recession probability to 35–40%, up from 30–35%.
The investment banking firm also expects core inflation to rise to 3.6%, citing the inclusion of non-tariff barriers and VAT-like calculations in the tariff structure.
With market pricing already reflecting a sharp increase in recession odds—49% implied by the S&P 500, up from 27% prior to the latest escalation—the strategists suggest that fear is well-embedded, and the “risk-reward is becoming more attractive.”