The S&P 500 is pretty much back to all-time highs:
But it seems like that has only focused people on how a recession might be kicked off, and one absolutely classic cause has reared its head in the form of Israel v Iran:
Between oil prices as a potential catalyst and concerns over the deficit, trade wars, supply chain disruption from tariffs, a weak market for new grads, and a sprinkle of consumer debt weakness for good measure, we’ve got some real worrying going around.
Add that to my least favorite economic development of the week, the suggestion that Bessent might be the next Fed Chair, and it is reasonable to fear we are sailing straight into the doldrums.
Moments of Zen
Some quotes from the linked articles above:
Like its 1973-74 predecessor, the second oil shock of the 1970s was associated with events in the Middle East, but it was also driven by strong global oil demand. The Iranian Revolution began in early 1978 and ended a year later, when the royal reign of Shah Mohammad Reza Pahlavi collapsed and Sheikh Khomeini took control as grand ayatollah of the Islamic republic. In conjunction with the revolution, Iranian oil output declined by 4.8 million barrels per day (7 percent of world production at the time) by January 1979. However, this supply disruption may not have been the most important factor pushing oil prices higher. Rather, the Iranian disruption may have prompted a fear of further disruptions and spurred widespread speculative hoarding.
The oil price shock, as economists have coined it, occurred as monetary policy-makers acted to keep the economy from overheating. This combination of events has raised a few red flags in certain quarters, since nearly all post-World War II recessions were preceded by higher oil prices and a restrictive monetary policy.
Nigeria's economy contracted 1.5 percent in 2016 due to lower oil revenues and a shortage of hard currency, the National Bureau of Statistics said on Tuesday, its first annual contraction in quarter of a century.
Citigroup Inc. is set to put aside hundreds of millions of dollars more than it did last quarter to account for potential losses on loans, an early sign that the biggest US banks may be bracing for deteriorating economic health.
As companies freeze hiring and AI makes some less-skilled roles obsolete, the Class of 2025 is finding a lot of doors are closed.
The Midwestern US, which accounts for almost a third of all manufacturing jobs and production output in America, was devastated when factory employment went offshore two decades ago.
Now President Donald Trump’s tariffs are threatening to stall a resurgence in the region.
From Cleveland to Omaha, manufacturers say tariffs have raised the prices of inputs and equipment they need to expand, and retaliatory duties threaten their exports. Hiring and investment are also frozen because of the uncertainty from Trump’s ever-changing trade policies.
That move has come with economic costs. By 2030, Bloomberg Economics forecasts, if Trump’s current tariff regime endures, the global economy will be $1 trillion smaller than it would have been had the US remained in the TPP. More than a third of that loss would come because of a smaller US economy, the analysis finds, with the US share of global trade tumbling even as China’s stays steady. The consequence for Americans: 690,000 fewer jobs.
Trump’s policies have slowed the US economy, making a downturn more likely. But the nation’s yawning deficit is a bigger threat.
President Trump says his decision on who will succeed Fed Chair Jerome Powell “is coming out very soon.”