To Recession or Not to Recession: Are We Asking the Right Question?
If 2025 is teaching us anything, it’s that economic forecasting is starting to feel like weather predictions: frequently wrong, yet strangely addictive.
Lately, economic pundits have been duking it out over the probability of a recession in 2025. Some cite rising policy uncertainty under the Trump administration, with rapid-fire decisions on trade, tariffs, and regulation creating a foggy business environment. CEOs are hesitant, consumers are cautious, and market forecasters are—well, predictably dramatic.
Yes, the concerns are valid. Economic uncertainty slows investment, and people tend to postpone large purchases when they’re unsure about their jobs or portfolios. But instead of spinning our wheels over whether a recession is technically coming, maybe it’s time to ask a better question.
Recession? Let’s Define Our Terms
There’s the textbook definition—two consecutive quarters of negative GDP growth—and then there’s reality.
GDP shrank in Q1 2025, but a 41% surge in imports was the main culprit, not a true drop in domestic economic activity. GDP subtracts imports from its final figure because dollars spent abroad don’t count toward domestic production. That’s accounting nuance—not necessarily a slowdown.
The National Bureau of Economic Research (NBER) is the official referee on recessions. Their criteria include income, employment, production, and retail sales—not just one metric. By the time they issue a ruling, we’re usually already in recovery.
Meanwhile, consumer spending grew 1.8% last quarter, and unemployment remains a steady 4.2%. Doesn’t exactly scream “economic crisis.”
If It Happens, It’s Likely to Be Mild
That’s not to say we’re recession-proof. Trade tensions and tariff drama could spark a slowdown—especially for small businesses relying on overseas suppliers. Some large retailers had paused shipments from China but have recently resumed, signaling they expect tariffs to ease before their goods arrive.
Some of the growth in consumer spending captured in Q1 GDP may have been pulled forward due to fears of impending tariffs, with households likely accelerating purchases to sidestep anticipated price hikes. That could dampen spending in future quarters, but it doesn’t necessarily indicate deeper economic weakness.
If we do dip into recession territory, we’re entering from a position of relative strength. Corporate balance sheets are healthier than they’ve been in years. Many companies refinanced during the low-rate COVID years, pushing major debt obligations out to 2028 or later. Consumers? They’re doing better than headlines suggest—household net worth is at an all-time high, and delinquency rates remain low.
Historically, recessions triggered by external shocks (like policy uncertainty) tend to be shallower than those driven by credit bubbles. Translation: 2025 isn’t shaping up to be a rerun of 2008.
Or Not to Recession? Here’s the Case for Optimism
Let’s not overlook the labor market. Employers had trouble hiring before the pandemic and still aren’t eager to part with hard-won talent. If companies aren’t slashing jobs, consumer spending holds up—and the economy keeps moving.
Immigration slowdowns may further tighten labor supply. While that’s a separate debate entirely, it does suggest continued wage support.
And let’s not underestimate the Baby Boomers. This generation—buoyed by higher interest rates on savings, strong portfolio gains, and relatively good health—is still spending. A big part of why we avoided recession in 2022–2023 was their continued participation in the services economy. That trend hasn’t faded.
The Real Question: What Does Your Future Look Like?
Instead of obsessing over the next economic dip, maybe the better question is: What’s the story you want your financial life to tell?
My daughter is a junior in high school, and we’ve been discussing potential career paths and college majors. She recently asked me why I enjoy being a portfolio manager, and I explained that it’s an opportunity to express my view of how the future will unfold. The portfolio acts almost as the narrative of that future, with the companies we add serving as the characters in the story. That actually made her appreciate my job a little more and, I think, consider it less boring.
So, what’s your story?
• Are you planning for college tuition in the next few years?
• Retiring soon and needing reliable income?
• Already retired and thinking about your legacy?
If your portfolio is properly diversified and aligned with your short- and long-term needs, a mild recession—or even a volatile market—shouldn’t derail your plan. Because smart investing isn’t about reacting to headlines. It’s about staying disciplined through them.
Final Thought: Focus on the Journey
Recessions come and go. Financial planning is about preparing for the entire journey, not just dodging the occasional pothole. If you’re unsure whether your portfolio is telling the right story for your future, give us a call or send us an email. We’re always here to help you stay on course—recession or not.
About Ricardo
Ricardo J. Ferreira is the Portfolio Manager at Paragon Wealth, a firm he co-founded with Charlie McNamara, III, and Phil Rosenau. With a passion for finance and a talent for solving complex financial challenges, Ricardo leads the firm’s investment strategies, ensuring clients receive personalized and forward-thinking solutions.
A decorated U.S. Navy Veteran, Ricardo served at N.A.E.S. Lakehurst and aboard the USS George Washington, where he worked in aviation support. After his military service, he studied economics at Liberty University and began his financial career at Prudential Financial, where he met his future partners, Charlie and Phil.
Outside of work, Ricardo enjoys spending time with his family. He is married to Tina, owner of Main Street Accounting & Tax, and they have two children. Active in his community, Ricardo participates in various local events and serves on the finance council at St. Jude Parish in Chalfont. A passionate runner, he can often be found competing in local 5k and trail races on the weekends. To learn more about Ricardo, connect with him on LinkedIn.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss.
There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and does not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Great Valley Advisor Group, a registered investment advisor. Great Valley Group and Paragon Wealth Management are separate entities from LPL.