Slower economic growth is likely ahead with risk of a recession rising, according to the CNBC Fed Survey

The recent March CNBC Fed Survey revealed a heightened risk of recession, with respondents expressing concerns over fiscal policies from the Trump administration, particularly tariffs. This shift in sentiment has led to a downgrade in the growth forecast for 2025 and an increase in the inflation outlook. The S&P 500 outlook also experienced a decline for the first time since September.

The survey, consisting of 32 participants including fund managers, strategists, and analysts, raised the probability of a recession to 36%, up from 23% in January. This increase reflects a growing unease among investors about the impact of trade policies on the US economy. Barry Knapp of Ironsides Macroeconomics noted, “We’ve had an abundance of discussions with investors who are increasingly concerned the Trump agenda has gone off the rails due to trade policy.”

The average GDP forecast for 2025 was revised down to 1.7% from 2.4%, marking a significant decrease that ended a trend of consecutive increases in the past three surveys. Despite this, GDP is expected to rebound to 2.1% in 2026, aligning with previous forecasts.

Neil Dutta, head of economic research at Renaissance Macro Research, highlighted downside risks to consumer spending, citing a stagnant housing market and reduced spending by state and local governments as potential drags on GDP growth in 2025.

In terms of the Fed’s rate policy, most respondents anticipate at least two rate cuts this year, with three-quarters expecting two or more quarter-point cuts. The uncertainty stemming from tariffs has led to a wider range of views on the Fed’s actions, with 19% believing that no rate cuts will occur.

Peter Boockvar, chief investment officer at Bleakley Financial Group, emphasized the Fed’s dilemma in response to higher tariffs and weaker growth. The potential impact of tariffs on inflation, jobs, and growth remains a concern for over 70% of respondents.

Overall, the combination of trade tensions, government job cuts, and political dysfunction has raised fears of a recession. Mark Zandi, chief economist at Moody’s Analytics, warned that these factors could derail the previously strong economy. The outlook remains uncertain as investors navigate the evolving landscape of economic policies and trade relations.