Are we (not so) quietly entering a recession?
Ground-truth signals point to a recession with consumer and business confidence in rapid decline.
The recent stock market volatility was met with a split-screen narrative: financial media are paying close attention, particularly to tariff impacts and geopolitical catalysts, but policymaker interpretation remains anchored in "hard data" while consumer and business sentiment are deteriorating more quickly.
Even Fed Chair Jerome Powell, who emphasized lagging hard data indicators in the last FOMC announcement, last Friday hinted that sentiment (soft data) shows signs of economic slowdown. Powell's pivot is notable. It suggests sentiment is no longer just noise—it’s starting to become the signal.
Here are three emerging data points worth considering:
- Consumers (who drive roughly two-thirds of GDP) are pulling back.
- Hardship withdrawals from 401(k)s are 15%-20% above historical norms, (Empower CEO Ed Murphy, Bloomberg), while Vanguard found that 4.8% of plan participants initiated a hardship withdrawal, up from 3.6% last year).
- SME and mid-market B2B firms are freezing spend, delaying CAPEX, and becoming more cautious with headcount.
While headline numbers may remain positive for another quarter or two, we're likely drifting into a recession*—or worse, stagflation—driven not by the substance of public policy, but by its chaotic implementation.
* Blackrock CEO Larry Fink, speaking at the Economic Club of New York, on April 7, said that most CEOs he speaks with think the U.S. is already in a recession.
This isn't only a political problem. It's a policy process problem. And the economic consequences are beginning to show in the places where economic reality is harder to spin.
Last Friday morning, Torsten Sløk and the team at Apollo Global Management delivered a webinar, What Might Trump’s Liberation Day Mean to the US Economy and Financial Markets?
The slides from the presentation are on the link above. This post references Apollo's data, my observations from speaking with consumers and business people, and a little too much Bloomberg TV.
What the data tells us
| Risk Signal | What’s Happening | Source |
|---|---|---|
| Consumer confidence | Declining across Y levels; high-net-worth households skittish. | Slide 9 |
| Corporate confidence | CEO confidence, CAPEX expectations reversed sharply. | Slides 12–13 |
| Labor sentiment | Consumers fear job loss, even while unemployment remains low. | Slide 10 |
| Retaliatory exposure | Tariff-exposed sectors face input cost risks, margin compression. | Slides 5, 18 |
| Market fragility | Credit spreads decompressing; tariff-risk equity basket lagging. | Slide 25 |
Strategic implications for mid-market firms
- Demand risk: Apollo’s consumer sentiment and business confidence data suggest a brewing pullback. Plan for demand fluctuations—especially in discretionary and contract-based B2B sectors.
- Policy shock risk: The "Liberation Day" tariffs (Slide 5) were implemented with minimal lead time, showing how quickly conditions can shift. Scenario planning now needs to incorporate procedural volatility.
- Credit market access: Refinancing windows for sub-IG borrowers could close fast. Monitor signs from loan issuance (Slide 14) and M&A activity (Slide 16)—both are down significantly YoY.
Reality check: What ground-truth* signals are telling us
| Narrative | Ground-Truth Signal | Supporting Slides |
|---|---|---|
| “The consumer is strong” | Confidence and job-loss fears rising, even among affluent. | Slides 9–11 |
| “Corporate earnings are resilient” | Capex pullbacks and declining confidence. | Slides 12–13 |
| “AI is the next secular wave” | Mag 7 earnings concentrated, cyclical; 70%+ rev. abroad. | Slide 20 |
| “Markets are calm” | IG spreads disconnected from policy uncertainty. | Slide 21 |
| “We’ve avoided a hard landing” | Real GDP sensitivity to uncertainty is rising. | Slide 17 |
* The narrative conflict "hard" and "soft" data is unfortunate, with Powell dismissing the latter during the March FOMC meeting. Soft data reflects how people on main street feel—their "ground-truth." Although individuals often don't do what they say, in aggregate they do and that's the truth.
Watch list: What matters the next 60–90 days
- Consumer sentiment splits by income bracket – Slide 9.
- Private credit stress and refinancing wave – Slide 14; supplemental via LCD & S&P Global.
- Regional bank lending trends – use Fed H.8 data for SME lending.
- Bond default/downgrade rates – S&P/Fitch default trackers.
- Tariff escalation/retaliation events – Slides 5, 27.
- Equity dispersion in tariff-exposed names – Slide 25.
Final word
We're not yet in a broad crisis—although the recent stock market rout is a shock—but we may be in something worse: a slow-bleed environment where soft data and anecdotal pullbacks quietly outpace hard data.
Markets were pricing optimism, but operators are feeling pressure. It’s not the policies themselves. It's the unpredictable, accelerated way they’re being deployed that’s sapping confidence and capital formation.
If you're running a mid-market firm or advising one, now's the time to double down on strategic clarity, capital discipline, and scenario readiness. The fog is thick, but the signals are there if you look beyond the headlines.