Steve Hanke, Professor of Applied Economics at Johns Hopkins University, has stated that the probability of the United States entering a recession in 2025 far exceeds consensus estimates, placing the likelihood at 90%.
Hanke’s prediction significantly surpasses forecasts from major financial institutions like JPMorgan and Goldman Sachs, which estimate the probability between 40% and 60%.
He pointed to a slowdown in economic activity as the primary driver, noting that a recession would likely result in declining sales, profits, and corporate earnings, the scholar said in an interview with David Lin published on April 13.
“I think it’s over 90% [probability of a recession] this year. <…> We have a recession coming, and with a recession, sales go down, and if sales go down, profits go down, earnings go down,” he said.
The economist also criticized consensus earnings forecasts, which have already been revised downward from 15% to 10% growth for the S&P 500. Hanke believes these estimates remain overly optimistic, projecting zero growth or even a decline, aligning his outlook with that of JPMorgan CEO Jamie Dimon.
Dimon recently suggested that analysts could cut S&P 500 earnings forecasts to flat or as low as 5% negative in the coming months.
Lessons from the Great Depression
Drawing historical parallels, Hanke referenced the Great Depression, highlighting the devastating impact of the Smoot-Hawley Tariff Act of 1930. He noted that the tariff announcement in March 1930 triggered a stock market crash, with the market plunging 83% by July 1932.
Hanke expressed concern about current economic policies, warning that proposed tariffs could worsen economic conditions, potentially echoing the disruptions of the 1930s.
As previously reported by Finbold, Hanke reiterated his recession warning, emphasizing that internal economic contractions, not external shocks, are sufficient to trigger a downturn. He believes a slowdown is inevitable unless monetary policy changes significantly.
The warning came as President Donald Trump prepared to impose reciprocal tariffs on countries like China. Indeed, the tariffs were implemented on most countries, leading to a market downturn.
However, the president reversed course, issuing a 90-day tariff delay for most countries except China. Nevertheless, the market remains on the edge regarding the full impact of the tariffs on the economy.
Watch full interview below
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