No More Recessions? Friday’s Charts Suggest a Brave New Economic World

Wall Street’s crystal ball gazers are spinning a tantalizing tale—what if the business cycle flatlines for good? Today’s charts cut through the noise, mapping a future where dips get smoothed by algorithmic Fed interventions and corporate buyback brigades.

The bullish case: AI-driven productivity surges and decentralized finance bypass traditional credit crunches. The bearish counter: someone’s still holding the bag when the music stops—probably taxpayers.

One hedge fund manager’s take: ’This isn’t economics—it’s alchemy with a Bloomberg terminal.’

Suddenly, the next recession seems as far off as ever: The Atlanta Fed’s GDPNow model sees the US economy growing 2.4% in the current quarter.

It’s unlikely in Q3 or Q4, too:

Polymarket odds of a US recession in 2025 are down to 36%.

Are tariffs priced in now?

Barclays Research (via the Odd Lots newsletter), estimates that the current trade-weighted US tariff rate is now around 14% and analysts at Goldman Sachs said it “would probably remain elevated for the foreseeable future.” That’s lower than expected just a couple of weeks ago, but we may not be out of the woods yet. President TRUMP said today that, because there are too many countries to negotiate with, he will unilaterally decide tariff rates sometime in the next two or three weeks.

Wages > inflation, still:

US wages are still growing at 4.3%, according to the Atlanta Fed — well in excess of CPI, which ticked down to just 2.3% in April. The top line above is wage growth for job switchers, which may have further to fall: The Wall Street Journal noted this week that two-thirds of US workers believe they are overpaid.

Apropos of nothing:

This is from 2024, but I only found it this week: An Ipsos survey found that Asian (and some Latin American) countries are “excited” about AI while Europe and the Anglosphere are “nervous.” Let’s check back in a decade or two and see if that’s correlated to growth rates. (I suspect it will be.)

Why Joe Rogan should be for free trade:

John Lettieri notes that the beginning of globalization (marked by NAFTA in 1994) was coincident with a trend change in male earnings: After two decades of decline, male wages began rising again.  

Why everyone should be for free trade?

Lettieri also finds that, starting with NAFTA, wages for the lowest quartile of earners rose faster than wages for the top quartile. If, like me, you enjoy these kinds of narrative violations, his full thread on trade is a must-read.

The other deficit problem:

The current House budget proposal WOULD add $3.3 trillion to federal debt through 2034. It probably wouldn’t pass the Senate, but it seems a safe bet that whatever eventually does will be only marginally more responsible.

In good times and bad:

The really bad news about the US budget is not that it’s running a big deficit — it’s that it’s running a big deficit while the economy is booming. What’s this chart going to look like in the next recession? (If there ever is one.) Also, if your goal is to reduce the trade deficit, running a trillion dollar budget deficit year after year is, uh, not the way to do it.

Deficits are good for business, though:

Global equities (orange) and a 60/40 portfolio of global stocks and bonds (purple) both made all-time highs today. Global equities ex-US (blue) made the highest highs. 

Who said investing is hard?

If we don’t have to worry about traditional recessions anymore, it might not be.

Have a great weekend, moderate readers.

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