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With stocks soaring to fresh highs, recession may be the last thing on investors\u2019 minds. But according to Mark Zandi, chief economist at Moody\u2019s Analytics, America is uncomfortably close to one.<\/p>\n
In a recent interview with TheStreet, Zandi said the odds of a U.S. recession over the next 12 months are now sitting at 40% (1).<\/p>\n
\u201cJust for context, in a typical economy, what economists would call the unconditional probability of recession is closer to 15%,\u201d he said. \u201cSo, 40% is very elevated, very uncomfortable \u2014 it gives you a sense of how close I think things are to the edge here.\u201d<\/p>\n
Top Picks <\/p>\n
Zandi\u2019s warning came even after a better-than-expected jobs report, with the U.S. economy adding 115,000 jobs in April while the unemployment rate held steady at 4.3% (2).<\/p>\n
But the headline number didn\u2019t change his view.<\/p>\n
\u201cThe labor market is still a vulnerability in the economy, still very soft,\u201d he said, adding that recession risks remain \u201cvery high.\u201d<\/p>\n
Zandi said businesses remain reluctant to hire, with hiring rates \u201cstill very low across most industries.\u201d Hours worked also remain depressed, which Zandi said is \u201ckind of consistent with what you\u2019d see in a recession.\u201d<\/p>\n
He also pointed to falling labor-force participation \u2014 meaning fewer people are actively working or looking for work \u2014 as a warning sign. If participation had stayed steady over the past year, Zandi said, the unemployment rate would be closer to 5%.<\/p>\n
At the same time, inflation is becoming a bigger concern. Zandi said price pressures are picking up because of the Iran war, higher energy prices, tariffs and other factors \u2014 and that is eating into household purchasing power.<\/p>\n
\u201cReal disposable income \u2014 that\u2019s after tax, after accounting for inflation \u2014 is no higher today than it was a year ago,\u201d he said. \u201cSo, there\u2019s been no growth in purchasing power, and that\u2019s going to get worse and start declining.\u201d<\/p>\n
That pressure is already showing up in the choices consumers are making.<\/p>\n
Zandi noted that wealthy households are drawing down savings to supplement their purchasing power and maintain spending. But lower- and middle-income households don\u2019t have the same cushion.<\/p>\n
\u201cThey\u2019re living more paycheck to paycheck,\u201d he said.<\/p>\n
If Americans have to put more of their paychecks into the gas tank, he warned, they have less left over for everything else \u2014 from gym memberships to food choices.<\/p>\n
\u201cYou\u2019re gonna have to trade down. You can\u2019t have beef \u2014 you gotta have chicken,\u201d he said.<\/p>\n
Stocks are not the economy <\/p>\n
Meanwhile, Wall Street has been telling a very different story. Both the S&P 500 and the Nasdaq Composite have recently climbed to fresh highs.<\/p>\n
To Zandi, that disconnect is part of the problem.<\/p>\n
\u201cThe stock market\u2019s not the economy,\u201d he said. \u201cIn my 36 years as a professional economist, the stock market\u2019s never been more disjoint from the economy.\u201d<\/p>\n
He attributed much of the market\u2019s strength to artificial intelligence, especially large tech companies.<\/p>\n
\u201cWhat\u2019s driving the stock market train is these big hyperscalers and chip companies,\u201d he said, adding that the AI trade \u201cruns on its own dynamic\u201d and \u201chas nothing to do with the economy.\u201d<\/p>\n
Zandi also said investors appear to be betting that President Donald Trump will pivot if the economy or markets start to wobble.<\/p>\n
\u201cStock investors are looking at the president, the president\u2019s looking at the stock market,\u201d he said. \u201cThat doesn\u2019t feel like a stable\u2026 equilibrium \u2014 it\u2019s kind of like a hall of mirrors.\u201d<\/p>\n
Zandi also warned that valuations are stretched.<\/p>\n
\u201cValuations are awfully high,\u201d he said, noting that price-to-earnings multiples are near historic highs, \u201cexcept for perhaps during the internet bubble, which didn\u2019t end so well.\u201d<\/p>\n
Zandi isn\u2019t alone in sounding the alarm. Billionaire hedge fund manager Paul Tudor Jones has said<\/a> that the market \u201cfeels exactly like 1999.\u201d<\/p>\n Meanwhile, Warren Buffett\u2019s Berkshire Hathaway now holds $397.4 billion in cash \u2014 a record amount that many investors interpret as a signal of caution in an expensive market (3).<\/p>\n To be sure, markets are inherently volatile, and no forecast is guaranteed. But with valuations stretched and recession risk elevated, now may be a good time to consider how to diversify beyond traditional stocks.<\/p>\n Here are three simple ways to start.<\/p>\n Read More: Non-millionaires can now hoard property like the 1% \u2014 how to start with as little as $100<\/a><\/strong><\/p>\n \u2018A very effective diversifier\u2019 for bad times <\/p>\n When storm clouds gather over the economy, many investors start looking for assets that don\u2019t depend entirely on corporate earnings or stock-market momentum.<\/p>\n That\u2019s where gold often comes into the picture.<\/p>\n The precious metal has long been viewed as a go-to safe haven, especially during periods of economic stress or geopolitical turmoil. Unlike stocks, gold is not tied to a company\u2019s future performance. And unlike cash, it can\u2019t be printed at will by central banks.<\/p>\n Ray Dalio, founder of the world\u2019s largest hedge fund, Bridgewater Associates, told<\/a> CNBC last year that \u201cpeople don\u2019t have, typically, an adequate amount of gold in their portfolio,\u201d adding, \u201cwhen bad times come, gold is a very effective diversifier.\u201d<\/p>\n Even after a recent pullback, gold prices are still up nearly 40% over the past 12 months.<\/p>\n One way to invest in gold that also provides significant tax advantages is to open a gold IRA with the help of Priority Gold<\/a>.<\/p>\n Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, combining the tax advantages of an IRA with the protective benefits of investing in gold<\/a> \u2014 making it an appealing option for those looking to help shield their retirement funds against economic uncertainties.<\/p>\n And when you make a qualifying purchase with Priority Gold, you can receive up to $10,000 in precious metals<\/a> for free.<\/p>\n Income, even in a down market <\/p>\n Like stocks, real estate has its cycles, but it doesn\u2019t rely on a booming market to generate returns.<\/p>\n Even during a recession, high quality, essential real estate can continue to produce passive income through rent. In other words, you don\u2019t have to wait for prices to rebound to see a payoff \u2014 the asset itself can work for you.<\/p>\n It\u2019s also a time-tested hedge against inflation. As the cost of materials, labor and land rises, property values often increase as well. At the same time, rental income tends to climb, giving landlords a revenue stream that adjusts with inflation.<\/p>\n Owning rental property allows investors to collect monthly rent payments, but being a landlord is rarely as passive as it sounds. Managing a property involves finding and screening tenants, collecting rent and handling maintenance and repair requests (out of your own pocket) \u2014 and that\u2019s assuming you can save enough for a down payment and get a mortgage to buy the property in the first place.<\/p>\n But now, you don\u2019t need to buy a property outright to reap the benefits of real estate investing. Crowdfunding platforms like mogul<\/a> offer an easier way to get exposure to this income-generating asset class without the down payment.<\/p>\n The investment platform offers fractional ownership in blue-chip rental properties<\/a>, giving investors monthly rental income, real-time appreciation and tax benefits \u2014minus the 3 A.M. tenant calls.<\/p>\n Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide<\/a> for you. In other words, you gain access to institutional-quality offerings for a fraction of the usual cost.<\/p>\n Each property undergoes a rigorous vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Offerings often sell out in under three hours<\/a>, with investments typically ranging between $15,000 and $40,000 per property.<\/p>\n You can sign up for an account and then browse available properties here<\/a>.<\/p>\n An overlooked alternative <\/p>\n Prominent investors like Dalio often stress the importance of diversification \u2014 and for good reason. Many traditional assets tend to move in tandem, especially during periods of market stress.<\/p>\n That message feels especially relevant today. Nearly 40% of the S&P 500\u2019s weight is concentrated in its ten largest stocks and the index\u2019s CAPE ratio hasn\u2019t been this high since the dot-com boom.<\/p>\n This is where, for many investors, alternative assets come into play. These can include everything from real estate and precious metals to private equity and fine art.<\/p>\n It\u2019s easy to see why great works of art tend to appreciate over time. Supply is limited and many famous pieces have already been snatched up by museums and collectors. Art also has a low correlation with stocks and bonds, making it a solid diversification option.<\/p>\n In 2022, a collection of art owned by the late Microsoft co-founder Paul Allen sold for $1.5 billion at Christie\u2019s New York, making it the most valuable collection in auction history (4).<\/p>\n Of course, buying art on your own comes with major barriers: high prices, storage, insurance, authentication and the challenge of knowing which works may hold long-term value.<\/p>\n Now, Masterworks is offering a single investment that combines blue-chip art with other diversified assets like gold and bitcoin<\/a>, that have historically moved independently of equities and of one another.<\/p>\n The result is a more balanced, all-weather approach to alternative investing. In fact, this model would have outperformed the S&P 500 by 3.1x from 2017 to 2025.*<\/p>\n By leveraging access to museum-quality artwork alongside other uncorrelated assets, the strategy aims to enhance diversification while still pursuing meaningful appreciation.<\/p>\n Discover how this strategy can strengthen your portfolio for the years ahead<\/a>.<\/p>\n *Investing involves risk. Past performance is not indicative of future returns. The 3.1x figure reflects a model backtest, not actual fund performance.<\/p>\n Get expert guidance <\/p>\n When recession fears are colliding with historically high stock valuations, it can be hard to know whether your portfolio is truly prepared.<\/p>\n That\u2019s where working with a financial advisor can help.<\/p>\n A qualified advisor can review your current mix of stocks, bonds, cash and alternative assets, then help you build a strategy based on your goals, risk tolerance and time horizon. That can be especially valuable when headlines are noisy, inflation is sticky and even top economists are warning that the economy is close to the edge.<\/p>\n If you have a portfolio of $250,000 or more, platforms like WiserAdvisor<\/a> can connect you with vetted professionals who specialize in this kind of planning.<\/p>\n Just answer a few questions about your savings, retirement timeline and overall investment portfolio.<\/p>\n From there, WiserAdvisor reviews its network to match you with up to three vetted, reputable advisors aligned with your specific needs, for free.<\/p>\n You can then schedule no-obligation consultations<\/a> with your matches to determine who is the best fit for your long-term goals.<\/p>\n WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.<\/p>\n You May Also Like <\/p>\n Join 250,000+ readers and get Moneywise\u2019s best stories and exclusive interviews first \u2014 clear insights curated and delivered weekly. Subscribe now.<\/a><\/strong><\/p>\n Article Sources <\/p>\n We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines<\/a>.<\/p>\n YouTube (1)<\/a>; The New York Times (2)<\/a>; Berkshire Hathaway (3)<\/a>; Christie’s (4)<\/a><\/p>\n This article provides information only and should not be construed as advice. It is provided without warranty of any kind.<\/p>\n","protected":false},"excerpt":{"rendered":"Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. With stocks…\n","protected":false},"author":3,"featured_media":810029,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[12],"tags":[64,7780,79,21764,81567,51659,159265,2437,67,132,68],"class_list":["post-810028","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-dave-ramsey","tag-economy","tag-gold-prices","tag-mark-zandi","tag-priority-gold","tag-purchasing-power","tag-stock-market","tag-united-states","tag-unitedstates","tag-us"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/116607403665535239","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/810028","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=810028"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/810028\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/810029"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=810028"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=810028"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=810028"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}