If you believe the latest survey data, whether it’s from the Conference Board or from the University of Michigan, you would think the economy is on the cusp of a recession. Granted, the decline in confidence for both consumers and businesses is significant and not to be ignored. A change in feelings about the economic backdrop is often a harbinger of things to come and precedes a downshift in consumer spending and business investment.
During periods of uncertainty, investors should look past the headlines and analyze the underlying components for important signals. For example, take the latest survey from the Conference Board.
The headline index fell to its lowest level in over four years, but we also saw a modest increase in consumers planning to buy a new car or a home in the next six months. Perhaps the improvement in mortgage rates has encouraged prospective buyers to enter the residential market.
Lower Mortgage Rates Could Bring Buyers into the Market 
Source: LPL Research, Haver, Bloomberg 03/26/25
Disclosures: Past performance is no guarantee of future results.
Evidence of a Slowdown
We often call the survey data “soft” and put more credence on the “hard” transaction data.
So, what is that telling us?
The most concerning are the cutbacks in real consumer spending in January and soft spending in February. Business spending on capital goods such as machinery and office equipment has also been soft so far this year.
But the evidence is not all gloomy. The labor market is holding up well as businesses have an appetite to add to their payrolls. And correspondingly, the number of those filing for unemployment benefits remains very low despite some announced layoffs.
The Reality of Recessions
The reality is the U.S. economy is quite resilient, even during times of difficulty. Since World War II, a recession comes around every five or six years but only lasts ten months on average. The COVID-19 recession only lasted two months, the shortest on record. Each recession begins with some exogenous shock to the economy, such as a terrorist attack, a banking failure, or a global pandemic. We don’t see such a shock on the horizon.
Conclusion
The economy is probably not in recession at this point, but the uncertainty about Fed policy, interest rates, inflation, and trade wars put a damper on how consumers and businesses feel about current conditions. However, tracking the hard data can give us a fuller sense of how society is doing. One stat to monitor is unemployment claims, which we expect to rise if we are getting closer to recession.
LPL’s Strategic and Tactical Asset Allocation Committee (STAAC) maintains its tactical neutral stance on equities, with a preference for the U.S. over emerging markets, growth over value, and large caps over small. However, we do not rule out the possibility of additional short-term weakness, as the pace of growth is cooling, and trade policy and geopolitical uncertainty remain high.
While the risk-reward trade-off for beaten-down stocks has clearly improved, a swift and sustainable recovery seems unlikely under the cloud of trade uncertainty. We continue to monitor tariff news, economic data, earnings estimates, and various technical indicators to identify a potentially attractive entry point to add equities.