What a Recession in 2025 Could Mean for Stocks

April 28, 2025

| Sean Michael Cummings

One of America's top airlines won't hazard a guess about what its books will look like a year from now.

Typically, United Airlines (UAL) offers quarterly projections based on a consensus view of the economy. But this month, United says no such consensus exists... and it's hard to disagree.

Consider that just since last Tuesday...

The White House announced that its proposed 145% tariff on China would "come down substantially."
The Wall Street Journal reported China tariffs were set to drop to between 50% and 65%.
Treasury Secretary Scott Bessent denied the Wall Street Journal report.
Bessent insisted that the administration was not offering unilateral tariff cuts to China, adding that a trade deal could take two to three years.

With such an unpredictable economic backdrop, companies can't model the business cycle...

So instead of making one forecast, United issued two. It gave one set of guidance in case a recession hits... and a second set in case one doesn't.

United isn't alone in this, either. Delta Air Lines (DAL) also withdrew its full-year guidance earlier this month. And Southwest Airlines (LUV) and American Airlines (AAL) abandoned their guidance last week.

The airlines are flashing warning signs about the broader economy right now. And investors may want to adopt the same cautious approach in their own portfolios for the coming months.

Let me show you why...

This Stock Market Correction Has Two Possible Outcomes

The Trump tariffs brought massive volatility to the markets this year.

In the wake of Trump's trade announcements, the S&P 500 Index has plunged 11% since its February peak. And the Dow Jones Industrial Average and Nasdaq Composite Index are down 11% and 14%, respectively.

The U.S. market has been a strong outperformer in recent years. Over time, U.S. investors have been conditioned to "buy the dip."

But you might want to wait on this one... for a few more weeks at least.

Warren Pies of 3Fourteen Research highlighted the reason why in a research report last month. And he shared some of the details on social media platform X...

Pies plotted the average returns for the S&P 500 after 10% corrections, comparing what happened in two different kinds of markets. The first was when a recession followed within 12 months of the correction... And the second was a correction with no recession.

You can see the market's comparative performance in each case below...

A double-whammy of "correction and recession" turned stocks sideways for a full year. But when a recession didn't appear, stocks rallied about 12%.

Most investors are scouring the headlines to predict the White House's next move. But Pies shows the essential question today is simple: Will we get a recession or not?

That's why you should tune out the administration's noise... and focus on the economy instead.

If the U.S. macro picture starts to deteriorate, cracks will appear in data like U.S. housing starts and jobless claims. (Last week, my colleague Brett Eversole wrote about another recession indicator that's flashing red today – high-yield bond spreads.)

Headlines and policymakers can offer little clarity today. Instead, investors should focus on real-world indicators. They will clue you in to the first signs of a genuine recession.

But if we don't see major cracks appear in the next month or so, you'll want to be aggressive. In that case, history says the bulls will retake control – and you'll want to buy stocks hand over fist.

Good investing,

Sean Michael Cummings

What a Recession in 2025 Could Mean for Stocks

This Stock Market Correction Has Two Possible Outcomes

Further Reading