UBS Predicts High Recession Risk in U.S. Economy by 2025

UBS warns of a 93% risk of a US economic recession by 2025, citing an inverted yield curve and credit market pressures. While not predicting a recession, the bank anticipates weak economic growth in 2025 with a potential recovery in 2026. Analysts from Moody's and JPMorgan echo UBS' concerns, warning of potential stagflation and economic stagnation.

UBS, a leading global bank, has issued a stark warning, estimating a 93% probability of a U.S. economic recession by the end of 2025. The bank's analysis, based on "hard data" such as personal income, consumption, industrial production, and employment data, indicates a sustained period of economic weakness [1].

The key indicators pointing to a recession include an inverted yield curve, which is 23% inverted, and elevated credit market stress. UBS's proprietary factor model, which excludes sentiment surveys and financial market signals, has shown that while most metrics are turning negative, none are showing signs of rapid unraveling. This suggests a prolonged phase of stagnation or slow contraction, rather than an immediate collapse [1].

Despite the high recession probability, UBS is not forecasting a recession but expects "soggy growth" in 2025, followed by a potential recovery in 2026. The bank's recession tracker, combining hard data, inverted yield curve, and credit market indicators, shows an aggregate recession probability of 52% for July, up 15 percentage points since January [1].

Analysts from Moody's and JPMorgan have echoed UBS' concerns. Mark Zandi, chief economist for Moody's Analytics, warned that the U.S. is on the precipice of a recession, citing similar hard data as UBS. JPMorgan also emphasized that a slide in labor demand is a recession warning signal [1].

The outlook is further compounded by the expiration of the federal EV tax credit on September 30, which could significantly impact electric vehicle sales. Tesla, for instance, is raising U.S. lease prices on its Model 3 and Model Y by $50 and $80 a month, respectively, to offset the loss of the tax credit [2].

While the economic outlook is bleak, it is essential for investors and financial professionals to remain vigilant and prepared for potential market fluctuations. UBS's cautious approach and the consensus among analysts suggest a period of economic uncertainty and potential stagflation ahead.

References:
[1] https://fortune.com/2025/09/02/recession-probability-93-percent-hard-data-ubs-stable-elevated-economy/
[2] https://stocktwits.com/news-articles/markets/equity/tesla-to-raise-us-lease-prices-on-model-3-model-y-ahead-of-ev-tax-credit-expiration/chw5pmFRdog