Navigating the Current Market Environment: Insights from Zacks Market Edge Podcast Episode #453

Tracey Ryniec and John Blank discuss the possibility of a recession in 2025, despite positive GDP and steady employment. They consider the impact of tariffs, the AI Revolution, and the Leading Economic Indicators. They also discuss three stocks: NVIDIA, Fastenal, and Cintas. Fastenal has beaten earnings expectations and is up 27.6% YTD with a forward P/E ratio of 41.2. NVIDIA has pushed for new 52-week highs, while Cintas is not mentioned.

Tracey Ryniec and John Blank, financial analysts, discuss the possibility of a recession in 2025, despite positive GDP and steady employment. They consider the impact of tariffs, the AI Revolution, and the Leading Economic Indicators. They also discuss three stocks: NVIDIA, Fastenal, and Cintas.

Despite the U.S. economy adding 147,000 jobs in June and a slight dip in the unemployment rate to 4.1%, concerns about a potential recession in 2025 persist. The U.S. GDP growth dropped from positive 2.4% in the fourth quarter of 2024 to negative 0.5% in the first quarter of 2025 [1]. The Federal Reserve's latest projections suggest full-year U.S. GDP growth of just 1.4% in 2025, but the labor market remains resilient, with job openings exceeding unemployed workers [1].

Tariffs and inflation are significant risk factors for a recession in 2025. The U.S. implemented aggressive tariffs on imported goods, with China responding by raising tariffs on U.S. goods. Inflation remains elevated, with core PCE (personal consumption expenditures) up 2.7% year over year in May [1]. The Federal Reserve has paused its interest rate cuts, with projections suggesting only two 25-basis-point rate cuts in 2025, bringing the fed funds target range down to between 3.75% and 4% entering 2026 [1].

The New York Fed's recession probability model suggests a 28.7% chance of a U.S. recession in the next 12 months, while JPMorgan estimates the probability at 40% [1]. Goldman Sachs estimates U.S. recession odds at 30% and forecasts just 1.25% U.S. GDP growth in 2025 [1]. The Atlanta Fed's GDPNow model is more optimistic, expecting the second-quarter GDP report to show 2.6% growth [1].

Fastenal, a leading provider of industrial supplies, has beaten earnings expectations and is up 27.6% YTD with a forward P/E ratio of 41.2. The company's strong performance can be attributed to its defensive nature, as it provides essential supplies to various industries. NVIDIA has pushed for new 52-week highs, benefiting from the AI Revolution and increasing demand for its graphics processing units (GPUs) [1].

Cintas, a uniform rental and supply company, is not mentioned in the discussion, but it is also considered a defensive stock due to its consistent demand and stable earnings. Investors should consider reducing exposure to volatile stocks and increasing cash holdings during a recession, while also considering defensive investments like utility, healthcare, and consumer staples stocks [1].

In conclusion, while the U.S. economy shows signs of resilience, the potential for a recession in 2025 remains a concern. Investors should monitor economic indicators, tariffs, and inflation, and consider defensive stocks and cash holdings to manage risk. The AI Revolution and strong performance of companies like NVIDIA and Fastenal provide opportunities for investors to navigate the uncertain economic landscape.

References:
[1] https://money.usnews.com/investing/articles/recession-2025-what-to-watch-how-to-prepare
[2] https://www.advisorperspectives.com/dshort/updates/2025/07/17/the-big-four-recession-indicators