The recent announcement from JP Morgan has sent shockwaves through global markets, significantly increasing the likelihood of a recession to 60%. This uptick follows U.S. President Donald Trump’s declaration of sweeping reciprocal tariffs, which the brokerage labeled as a result of "disruptive American politics." Their research report ominously titled, ‘There Will Be Blood’, also highlighted that this political climate poses the greatest threat to global economic stability. Adding to the tension, China responded with its own tariffs, imposing an additional 34% tax on American goods.

Rising Recession Risks

In a note to clients, Chief Economist Bruce Kasman emphasized the seriousness of the situation, stating, “The risk of recession in the global economy this year has risen to 60%, up from 40%. The implications of this tax increase are likely to be amplified by retaliatory measures, a downturn in U.S. business sentiment, and disruptions in supply chains.”

• Estimated Costs: The newly announced tariffs are projected to impose a burden of around $700 billion on U.S. consumers.
• Historical Context: Kasman pointed out that these tariffs represent the largest tax increase on American households and businesses since 1968.
• Previous Projections: JP Morgan had earlier set the recession risk at 40% until March, up from 30% at the beginning of the year.

Wall Street Takes a Hit

Following these developments, U.S. stock markets opened sharply lower on Friday. The tech-heavy Nasdaq plummeted by over 20% from its previous record high set in December, signaling a potential bear market. The S&P 500 fell by 134.05 points (or 2.48%), settling at 5,262.47 points, while the Nasdaq Composite dropped 473.16 points (or 2.86%) to 16,077.44. The Dow Jones Industrial Average also saw a significant decline, losing 994.46 points (or 2.45%) to reach 39,551.47.

Bear Market Predictions

Investment expert David Bahnsen, the chief investment officer at The Bahnsen Group, expressed concern over the ongoing tariff situation, stating, “If the current slate of tariffs remains in place, a recession in Q2 or Q3 is highly probable, along with the potential for a bear market.” He posed a critical question regarding whether President Trump would consider scaling back these policies in response to a downturn in the stock market.

As the Nasdaq Composite index appeared set to confirm its bear market status, investors were increasingly wary of riskier assets. The anxiety surrounding Trump’s tariffs raised fears of a potential trade war, which could further destabilize the global economy.

In a related note, just a day earlier, the Russell 2000, a benchmark for small-cap stocks, became the first major U.S. index to officially enter bear market territory, signaling deepening concerns across various sectors.

As the situation unfolds, analysts and investors alike are keenly watching for any policy shifts that could alter the current trajectory of the markets.