Tariff uncertainty and softening consumer data have nudged U.S. recession odds higher, yet key fundamentals like labor and earnings remain relatively resilient. Markets continue to digest shifting policy signals, with sector-level earnings revisions and sentiment playing a growing role in near-term dynamics.
Key Insights:
- Recession odds revised up amid rising policy risk; base case remains continued expansion with slower growth.
- U.S. real GDP forecast trimmed to below potential for 2025, reflecting the drag from tighter fiscal and monetary policy.
- Sector-level S&P 500 EPS estimates have declined just -1.2% YTD, still pointing to +9% earnings growth in 2025.
- Financials saw the strongest 2025 EPS revisions (+2.0%), while Materials (-8.9%) and Energy (-4.1%) led to the downside.
- Large corporations and value-oriented sectors like Financials appear better positioned amidst rising volatility and policy-driven headwinds.
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