Billionaire fund manager sends hard-nosed message on recession in 2025
Stocks were hard hit after President Trump announced broad-based tariffs on April 2nd, the so-called 'Liberation Day.' The announcement included tariff rates much higher than expected, causing investors to rethink their outlooks for the U.S. economy and corporate earnings.
The stock market hit came amid recent data already showing that the U.S. economy is slowing, increasing the possibility that higher inflation caused by tariffs may push us into recession.
Related: Veteran analyst who predicted gold prices would rally offers a blunt new forecast
The potential that the U.S. economy could deliver a blow to corporate America's revenue and profit has caught the attention of veteran Wall Street fund manager Ken Fisher, the billionaire founder of Fisher Investments, a money management firm with $295 billion in assets under management.
Fisher recently updated his recession outlook for this year.
His opinion is worth considering because he's been navigating the stock market professionally since the 1970s, giving him a front-row seat to the S&L crisis, internet bust, Great Financial Crisis, Covid meltdown, and 2022's bear market.
The stock market is struggling as recession worry grows in 2025.Image source: Michael M. Santiago/Getty Images
Will the Federal Reserve be wrong on interest rates again?
The Federal Reserve may soon find itself behind the curve yet again. In 2021, Federal Reserve Chairman Jerome Powell made the mistake of thinking that sparks of inflation were "transitory," only to be forced to embrace the most restrictive monetary policy since the 1980s in 2022.
Related: Billionaire fund manager delivers blunt message on U.S. vs. Europe
Now, Powell and other Fed members similarly describe the impact of tariffs on inflation as "transitory." It will be a while before we know if that's true, but there's little doubt among economists that, transitory or not, inflation is heading higher because of Trump's tariff plans.
Given that inflation is cumulative, the impact over the past three years is still being felt. Inflation has slowed below 3%, far below its 8% peak in 2022, but since inflation stacks on top of past increases, pressure on consumers is high.
Unfortunately, the Fed finds itself backed into a corner. Its dual mandate is low inflation and unemployment, and those two goals often contradict each other. Raising interest rates to fight inflation increases unemployment, and cutting rates is inflationary.
Since unemployment is rising and economic data suggests GDP is slowing, the Fed may be inclined to cut rates. However, because tariffs already risk igniting inflation, the Fed appears hesitant to add more fuel to the inflationary fire.
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