In the first few months of the year, fears over the US economy were growing and for good reason. In April, the US announced sweeping and aggressive tariffs, this came on top of escalating wars in the Middle East and high interest rates. The narrative was this was the “end of American exceptionalism”.
This growing pessimism was reflected in the markets. In the year to April, the S&P 500 index fell 16 per cent, while the Russell 2000 index was down 20 per cent. The sell-off reflected what people were expecting in the real economy. In April, the odds of a US recession this year peaked at 64 per cent, on the prediction market Polymarket.
However, so far, the worst of this is yet to materialise. It’s easy to get caught up in the big narratives but for whatever reason, the US economy is remarkably resilient. On their recent earnings calls, Citi (US:C) and JPMorgan Chase (US:JPM) both reported that the US consumer remained resilient. “The strength of the US economy, driven by the American entrepreneur and a healthy consumer, has certainly been exceeding expectations of late,” said Citi chief executive Jane Fraser.