According to a Chief Executive survey of more than 300 CEOs released on Monday, 62% said they forecasted a recession or other economic downturn in the next six months.
The monthly survey reveals an index based on CEOs' rating of current business conditions and future outlook.
According to the Chief Executive, it is now at its lowest level since November 2012.
Tariff turmoil
According to the survey, President Donald Trump's global tariff regime was a major factor in their negative outlook.
Of the respondents, 67% said they do not approve of the tariffs, and 76% said they would negatively or very negatively impact their businesses this year.
Mitchell Metal Products President and CEO Tim Zimmerman said (via Chief Executive):
Tariffs and the uncertainty of next steps that will be taken by President Trump will lead to very difficult economic times over the next year or two.
What does a recession look like?
So if a recession does come, what does it look like?
A recession is generally defined as a sustained decline in gross domestic product (also known as negative GDP growth) for 6 months or more.
In addition to poor economic growth, a recession is typically accompanied by rising unemployment, reduced consumer spending, lower business investment and falling stock markets.
It's important to note every recession is different. Looking back at previous examples can help contextualise, but not be a perfect roadmap of what's to come.
What happened to stocks in previous recessions?
COVID -19 Recession (February to April 2020)
The S&P 500 Index (SP: .INX) fell 33.92% from its highest point during the recession. The NASDAQ-100 Index (NASDAQ: NDX) fell 30.25% from its recession peak.
It took the S&P 500 126 trading days after the end of the recession to recover to its pre-recession level. It took the NASDAQ 76 days.
Great Recession (December 2007 to June 2009)
During the recession, the S&P 500 fell 55.47% from its highest point within the period. The NASDAQ fell 53.43% from its peak.
It took the S&P 500 895 trading days after the end of the recession to recover to its pre-recession level. It took the NASDAQ 373 days.
Why do stock prices fall during a recession
Typically, people and businesses spend less and therefore companies make less money. Lower reported earnings can influence stock prices.
Additionally, investors may panic and sell off stocks, especially in sectors investors see as highly influenced by the economy like tech or retail.
Investors may also shift from stocks to "safer" investments such as bonds or gold. We have already seen this in Australia this year due to global uncertainty.
What does it mean for Australian investors?
Whilst the survey focussed on the US economy, it is relevant for Australian investors because the S&P/ASX 200 Index (ASX: XJO) has historically mirrored global economic downturns, experiencing significant declines during major U.S. recessions.
2025 has already seen the ASX splutter, and one option for investors who also anticipate economic downturn could be defensive shares.
Defensive stocks are shares in (usually) mature, dividend-paying companies. These companies also have a record of consistent profits regardless of the state of the broader economy.
Investors often associate them with industries like consumer staples, healthcare, utilities etc.
Some defensive options that could be worth researching further could be:
