Investors Retreat from Risk Assets as JPMorgan Raises Recession Odds to 40%

Investor sentiment took a sharp downturn this week, with major stock indices and risk assets—including tech stocks and cryptocurrencies—facing significant selloffs amid growing concerns over a potential U.S. recession. On March 10, both the S&P 500, the Nasdaq, and the Dow Jones Industrial Average all experienced notable declines, reflecting widespread fear over the health of the U.S. economy.

JPMorgan Raises Recession Risk to 40%

JPMorgan economists have raised their recession probability for the U.S. in 2025 to 40%, up from 30% at the beginning of the year. The Wall Street investment bank cited "extreme U.S. policies" as a material risk for a downturn. According to analysts, these policies—particularly concerning fiscal and monetary actions—could push the U.S. economy into a recession this year.

“We see a material risk that the U.S. falls into recession this year owing to extreme U.S. policies,” said JPMorgan analysts, as reported by The Wall Street Journal. This outlook has contributed to rising anxiety in the financial markets.

Adding to the sense of uncertainty, economists at Goldman Sachs have raised their 12-month recession probability to 20%, up from 15%. They suggested that the likelihood of a recession could increase further if former President Donald Trump’s administration continues to push its economic policies, even in the face of worsening economic data.

Meanwhile, Morgan Stanley has lowered its growth forecasts for the U.S. economy, predicting a mere 1.5% GDP growth in 2025, dropping to 1.2% in 2026. At the same time, the bank raised inflation expectations, which further fueled concerns of an economic slowdown.

Contrasting Optimism from Trump Administration

Despite these bearish predictions, Kevin Hassett, a key economic adviser to former President Donald Trump, sought to downplay fears of an imminent recession. In a March 10 interview with CNBC, Hassett acknowledged some short-term challenges but maintained that there were many reasons to remain optimistic about the U.S. economy.

“There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data,” Hassett said, indicating that the short-term data should not overshadow the long-term outlook.

In a similar vein, former President Trump addressed concerns about a recession during an interview with Fox News on March 9, calling the current economic situation a "period of transition" rather than a full-blown downturn.

Tech and Crypto Markets Plunge

Despite this pushback from the Trump administration, markets reacted negatively to the economic uncertainty. On March 10, the S&P 500 fell 2.7%, marking its lowest level since September 2024. The Nasdaq had its worst day since 2022, dropping 4%, while the Dow Jones Industrial Average saw a significant decline of nearly 900 points, or 2.1%.

The tech sector, in particular, has been hard hit. The "Magnificent 7"—the top seven U.S. tech firms—lost more than $750 billion in market capitalization in just one day. Tesla, the worst performer on the S&P 500 this year, saw its stock plummet 15%. Other major tech companies also faced sharp declines: Nvidia dropped 5.1%, Apple fell 4.9%, Meta declined 4.4%, and Alphabet lost 4.5%.

The cryptocurrency market was similarly affected. On March 11, total crypto market capitalization fell by 7.5%, dropping to $2.6 trillion, with approximately $240 billion exiting the space. Bitcoin, the flagship cryptocurrency, also saw a sharp decline, falling through previous levels of support to as low as $76,784 before a minor recovery brought it back to around $79,000.

Market Sentiment and Recession Fears

The growing pessimism is reflected in the increased odds of a recession, as investors pull back from riskier assets. The uncertainty surrounding U.S. economic policies and inflation expectations has led to widespread market volatility, with many fearing that a downturn is imminent.

Even so, some market participants remain cautious but optimistic, with blockchain betting platform Polymarket humorously noting that recession odds are currently “the best looking chart in finance right now.” The evolving situation suggests that while the immediate future remains uncertain, investors are closely watching economic indicators to determine the next course of action.

As the year progresses, all eyes will be on economic data and how policymakers respond to these mounting concerns. With the risk of a recession now weighing more heavily on the market, volatility is expected to remain a key feature of the financial landscape in the coming months.