Mark Zandi sees trouble ahead for the US economy.
The Moody's Analytics chief economist recently predicted in a post on X that the US economy is on the brink of recession following some of the latest economic data.
While Zandi later noted that he doesn't think the US economy is in a recession yet, there are certain industries that have already entered one. Yet, that's just one of the reasons he thinks that the US economy is headed for harder times.
Zandi spoke with Business Insider about his outlook and how deep he thinks a recession could be. Here's what he's seeing ahead.
Policy headwinds
Zandi reiterated his initial argument to Business Insider, which is that the economy is under pressure from tariffs and restrictive immigration policy.
"I think the slowdown in growth and the acceleration of inflation is due entirely to economic policy," he said, adding that he believes the Department of Government Efficiency cuts had also contributed to a degree, and described Federal Reserve policy as a headwind.
From Zandi's point of view, all of these factors have pushed economic uncertainty to extremely high levels, delaying business investment and new hiring.
"These things aren't enough to push businesses to start laying off workers or curtailing investment, but they've been enough to cause businesses to put things on hold," he said.
On the subject of tariffs, Zandi said there's no question that they're being felt, and will be felt even more in the future, by consumers. While tariff impacts have been somewhat mild so far, prices are rising.
"In my view, the tariffs are substantive," he said. "They're slowly but still being passed through, and that'll become vividly clear in the next few months, as the tariffs get fully passed through to consumers."
How bad could a recession get?
Zandi noted in a recent X post that he sees a recession as characterized by a period of consistent declines in job growth that lasts for at least a few months. He added that by that definition, the US economy is not in a recession yet.
That said, Zandi said he thinks that is impossible to forecast exactly when the recession will hit and how bad it will be. That's especially true now, due to the highly unpredictable nature of President Donald Trump's economic policies.
"The reason why the economy is on the precipice of recession is policy. If we go into recession, just how deep and long the recession will be will be because of policy," he stated.
Zandi added that several industries are in fact already in a recession, including construction and manufacturing. He also addressed the possibility that a September rate cut might lead to further economic stability, raising a different perspective.
"The actual rate cuts themselves may not have as much of a benefit as one might think, because they've already been anticipated and discounted," he noted. "It'll help cushion the weakening of the economy, but it won't stop [it].
How should investors navigate a downturn?
Zandi said that while some asset classes could hold up better than others, there may be no safe havens if the downturn is severe.
"If history is a guide, then we should see long term rates come in a bit, and that should help bond prices and bond values" he stated. "But in a recession, no asset class is safe."
That doesn't mean the next recession will play out in exactly that fashion, though. Zandi reiterated his view that everything comes down to economic policy, which remains unpredictable.
He also said that if tariffs continue to increase, it could undermine the kind of safe-haven status that US assets like Treasurys and the dollar have long enjoyed.
Zandi has said that it is not clear if an economy is in recession until after it has happened, but he thinks that if the US tips into a downturn, changes to the economic policies that caused it will signal when the recession is ending.
"If it feels like we're coming to the end of the tariff increases, or like we're going to get a more rational immigration policy,' I think that would be a signal that the coast may be cleared," he said.
Though, as he also said in his posts on X, it appears unlikely that a policy shift is coming soon.
