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The case for a mild recession

April 30, 2025


Following steep tariff announcements by the Trump administration, odds of a recession have been on the rise. Should we tip over the edge into recession, that recession might look mild – and that outcome could already be discounted with the S&P 500® Index at 5,000, believes Jack Janasiewicz, Model Portfolio Manager, Natixis Investment Managers Solutions. Mild recessions historically have seen equities draw down roughly 20%.* “If we look at the recent peak-to-trough drawdown of the S&P 500®, with 4/8/25 marking the trough with the S&P 500® closing at 4982, then we came pretty close to fully discounting what a typical mild recession looks like,” said Janasiewicz.
 

S&P 500® market implied recession probabilities
Bar chart showing the probability of a recession from mild to average to deep *Source: Bloomberg
  • The US would be entering a recession from a strong starting point, increasing the economy’s resilience to this shock. This should shorten its duration – and limit the downside.
  • Of course, should tariffs stay on for a protracted length of time or become more severe, then the US economy will deteriorate faster, says Janasiewicz.

S&P 500® Index: S&P 500® Index is a widely recognized measure of U.S. stock market performance. It is an unmanaged index of 500 common stocks chosen for market size, liquidity, and industry group representation, among other factors. It also measures the performance of the large cap segment of the US equities market.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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