MW Stocks sell off on growth scare, yet companies' talk of recession is lowest since 2018

By Christine Idzelis

Pimco's Sonali Pier says she isn't expecting a recession this year

President Donald Trump's penchant for tariffs has raised recession fears in the stock market, yet companies aren't talking much about that growing worry.

During S&P 500 companies' fourth-quarter earnings calls conducted from Dec. 15 through March 6, only 13 mentioned the word "recession," the lowest number since the first quarter of 2018, according to a note from FactSet senior earnings analyst John Butters. "This number is well below the 5-year average of 80 and the 10-year average of 60," he said in the note.

The U.S. stock market is struggling in March as investors monitor tariffs and sweeping layoffs in the federal government directed by the Elon Musk-led entity known as the Department of Government Efficiency. The S&P 500 index SPX has dropped around 6% this month as of Monday afternoon, after seeing its worst week since September last week amid investors' rising worries over slowing economic growth in the U.S.

"It's getting harder to make out the shape of the economy through the fog of Trump 2.0's firings and tariffs," said Yardeni Research in a note Monday. "Stock investors are confused and seem to have concluded that the economy may be falling quickly into a recession."

Investors have worried that tariffs may add to inflation and place a drag on economic growth. Trump, during an interview with Fox News that aired on Sunday, didn't rule out a recession this year. "There is a period of transition because what we're doing is very big," he said. "We're bringing wealth back to America."

Trump also indicated during the interview that reciprocal tariffs will go into effect April 2.

Check out: Trump tariff talk is heating up on Wall Street, signaling a rocky road ahead for investors

U.S. stocks were under sharp pressure Monday afternoon, with the S&P 500 down 3.3%, the Dow Jones Industrial Average DJIA slumping 2.5% and the technology-heavy Nasdaq Composite COMP sliding 4.6%, according to FactSet data, at last check.

"We raised our 12-month recession probability only slightly from 15% to 20% because the White House has the option to pull back policy changes if downside risks begin to look more serious," David Mericle, chief U.S. economist at Goldman Sachs, said in an emailed note Monday.

Larger tariffs are "likely to hit GDP harder," Mericle said, with Goldman lowering its forecast for growth in U.S. gross domestic product in the fourth quarter of 2025 to 1.7% from 2.2%.

While Yardeni has been betting on a resilient U.S. economy, the firm last week increased the probability it sees for a recession to 35% from 20%, citing "Trump turmoil" in a March 5 note.

Read: Why investors who fear a recession and the end of 'American exceptionalism' may be overreacting

"The economy has been growing at a solid pace," Federal Reserve Chair Jerome Powell said Friday in remarks at a monetary-policy forum hosted by the University of Chicago Booth School of Business. While the Trump administration is "in the process of implementing significant policy changes" in trade, immigration, fiscal policy and regulation, Powell said, the Fed's current stance on monetary policy is "well positioned to deal with the risks and uncertainties."

"We do not need to be in a hurry, and are well positioned to wait for greater clarity," he said.

The U.S. economy added 151,000 jobs in February, according to a report Friday from the Bureau of Labor Statistics. The jobs report reflects a slowing pace of growth in the U.S., said Sonali Pier, portfolio manager for multisector credit at Pimco, in a phone interview.

Pier said she's not expecting a recession in 2025 but anticipates that slowing economic growth could prompt the Fed to potentially cut interest rates two or three times in "the back half of the year."

Bonds up, stocks down

Fixed income looks attractive versus both cash and equities, according to Pier, who is a portfolio manager for the Pimco Multisector Bond Active exchange-traded fund.

The actively managed ETF PYLD, which has flexibility to "go anywhere" in fixed income globally, lately has favored a larger exposure to investment-grade corporate bonds than to riskier high-yield debt, she said. The fund's current holdings are largely U.S. based and include securitized debt, according to Pier.

The ETF was up 0.3% on Monday afternoon, with the U.S. bond market broadly posting gains while stocks sold off. That brought the fund's total return this year to 2.6% based on afternoon trading levels, FactSet data show, at last check.

The iShares Core U.S. Aggregate Bond ETF AGG, which provides broad exposure to the U.S. investment-grade bond market, had also gained 2.6% this year on a total return basis as of Monday afternoon.

By contrast, the U.S. stock market is in the red so far in 2025, with Treasury yields BX:TMUBMUSD10Y also falling amid the recent growth scare.

The S&P 500's sharp fall Monday has left the U.S. equities benchmark down 5% year to date as of Monday afternoon, according to FactSet data, at last check.

-Christine Idzelis

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March 10, 2025 15:22 ET (19:22 GMT)

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