Recession Talk Is All The Rage

For week ended 3/15/2025.

Last week brought an unexpected twist in the inflation saga. The February CPI report showed year-over-year inflation cooling to 2.8%, down from January’s 3.0%. Even more surprising, the month-over-month increase dropped to 0.2% from 0.5%. Sounds like good news, right? Well, hold the champagne.

For starters, core inflation remains stubbornly high at 3.1%. But the real storm clouds on the horizon aren’t in the data—they’re in the collective mood of consumers (a.k.a. the people who drive the economy). Just look at the latest headlines: “Tariffs Set Off Scramble in the Supermarket Produce Aisle,” “Consumer Sentiment Tanks as Americans Expect More Pain Ahead,” “Here’s Where to Look for Early Signs of a Recession.” In other words, the "R-word" is suddenly back in vogue, and Washington’s usual chaos—tariffs, government layoffs, budget fights—isn’t helping.

And here’s the thing: uncertainty is toxic. Businesses, consumers, and markets all loathe it. The result? Stocks took another beating last week, with domestic shares down 2.2% and foreign stocks slipping 1.0%. Even bonds couldn’t catch a break, falling 0.1%. The only bright spots? Cash, up a thrilling 0.1%, and commodities, which eked out a 0.2% gain. Speaking of commodities, gold surged to nearly $3,000 an ounce. Nothing says "financial anxiety" quite like a mad dash for shiny metal.

Looking ahead, keep an eye on today’s retail sales report for February and Wednesday’s FOMC rate decision. The Fed will have the unenviable task of walking a tightrope—balancing inflationary pressures from tariffs against rapidly deteriorating consumer sentiment. Should be fun to watch (for them, not for us).

With that, enjoy your morning brew—whether it's coffee, tea, or something a little stronger. You might need it. Have a great week.