SA Sentiment: Lower odds of a recession after US-China truce

[Percentage sign on wooden cubes with Stack of coin bar chart and red graph trending downwards on white background. Economy recession crisis, inflation, stagflation, business and financial loss concept]
Mongkol Onnuan

After the U.S. and China agreed to roll back tariffs in May, markets are no longer seeing a high risk of a recession happening in the next 12 months.

"The size of the tariff tax hike has been scaled down, imparting less of a purchasing power squeeze," Joseph Lupton, global economist at J.P. Morgan, said recently. "We no longer see a U.S. recession, but expect material headwinds to keep growth weak through the rest of this year."

Beth Ann Bovino, chief economist for U.S. Bank, sees current recession risk at 40%. "If previous tariff levels re-emerge after the 90-day pause, the recession threat is likely to rise again."

Goldman Sachs economists now see a 35% chance [https://seekingalpha.com/news/4446996-goldman-sachs-cuts-us-recession-odds-ups-sp-targets-on-lower-tariffs] of a recession. "That's still above the usual background risk in any given year of about 15% probability," they noted.

Seeking Alpha readers have also dialed back their expectations for a recession, according to the Sentiment Survey [https://docs.google.com/forms/d/e/1FAIpQLSc66DBEyGqhbPJf7B_aNAzgvwW_4iHg5V032VuP5zJEkRYJHA/viewanalytics] in May that gathered over 1,000 responses.

The percentage of respondents seeing 0%-25% recession odds increased by 11 percentage points M/M. Meanwhile, the percentage of respondents forecasting 50%-75% probability has gone down 8 pp M/M.

Here's how SA readers' expectations for a recession have changed this year:
[Seeking Alpha survey results]
Seeking Alpha survey by Wall Street Breakfast

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* Major May Rally, Stocks Soar Amid AI Optimism And Tariff Relief [https://seekingalpha.com/article/4791315-major-may-rally-stocks-soar-amid-ai-optimism-and-tariff-relief]