Daniel von Ahlen, senior macro strategist at GlobalData TS Lombard, is urging caution for equity investors, warning that the recent market decline is not a buying opportunity. In his latest market note, von Ahlen states that investors are underestimating the full economic impact of President Donald Trump’s tariff actions and are failing to properly price in the likelihood of a recession.
The S&P 500 has declined by 13% since its peak in mid-February, as markets react to the re-escalation of trade tensions. However, von Ahlen argues that this correction has not gone far enough given the scale of the risks building in the economy. “There’s a dangerous level of complacency in markets right now,” he wrote. “Investors are significantly underpricing recession risk.”
While Trump’s recent 90-day tariff reprieve sparked a relief rally, von Ahlen expects the bounce to be fleeting. “This rally is an opportunity to reduce risk. We advise clients to sell into strength rather than buy into weakness,” he said, signaling a tactical shift toward defense rather than opportunism.
One of von Ahlen’s core concerns is the overly optimistic consensus for U.S. GDP growth. Current forecasts, which hover around 1.8% for 2025, fail to reflect the deteriorating economic backdrop. “That kind of growth projection is incompatible with the drag we anticipate from tariffs and related policy shifts,” he warned, citing the likely erosion in real consumer purchasing power from higher prices.
To underscore the dislocation between macro risks and market pricing, von Ahlen pointed to the divergence between declining earnings in historical recession periods and still-rising profit expectations for the year ahead. While fundamentals are clearly softening, forward-looking earnings estimates have yet to catch down to reality.
Beyond trade policy, von Ahlen sees several structural and policy-related headwinds that could deepen the slowdown. Chief among them is a pending round of federal spending cuts being discussed by the White House Office of Domestic Government Expenditures (DOGE). If implemented, those cuts could directly reduce job growth and indirectly weaken corporate earnings by pulling liquidity out of the economy.
Moreover, he notes that any effort to revive Trump-era tax reductions would likely be offset by even steeper spending cuts elsewhere, amplifying the deflationary pressures already building. “Any fiscal push on tax cuts is likely to be neutralized or outweighed by the necessary offsets,” the strategist wrote.
Policy uncertainty, particularly around trade and fiscal governance, is also undermining corporate decision-making. Von Ahlen flagged early signs of weakening capital investment and declining hiring intentions among U.S. businesses as evidence that economic momentum is slipping. “When companies don’t know what the policy environment will look like in six months, they pull back. That uncertainty is now pervasive,” he added.
Immigration policy is another underappreciated factor in von Ahlen’s view. The administration’s ongoing crackdown on immigration could have longer-term implications for labor force growth, which is a foundational input for potential GDP. “Without a growing labor force, you’re effectively reducing the economy’s ability to grow sustainably,” he noted. Combined with declining real income growth, these forces could deliver a sharper downturn than many expect.
Importantly, von Ahlen emphasized that the market downturn itself is not just a symptom, but a potential amplifier of economic weakness. He cited the wealth effect — the tendency of consumers to spend more when asset values rise — as a critical mechanism now working in reverse. With market volatility surging and valuations correcting sharply, consumer sentiment is likely to deteriorate further. “The sharp market decline we’re witnessing is reminiscent of March 2020 levels of volatility. And unlike then, there’s no coordinated monetary backstop,” he wrote.
He further noted that U.S. household equity exposure is near historic highs, making the current drawdown especially impactful from a behavioral finance standpoint. “When investors are this overweight equities, negative feedback loops can develop quickly as losses compound,” he cautioned.
Yet despite these warnings, von Ahlen’s bearish outlook is not being widely embraced by the investor community. Steve Sosnick, chief strategist at Interactive Brokers, told Business Insider that client flows continue to favor buying the dip — a strategy that has delivered strong results over the past several years. “We’re still seeing net buying activity from clients. They bought the bounce, and they bought the dip,” Sosnick reported.
One of the most purchased names among Interactive Brokers clients in recent weeks has been Nvidia — a company that, while widely loved by retail and institutional investors alike, remains exposed to uncertainties from ongoing trade negotiations. According to Sosnick, investors may not alter their behavior until a prolonged and severe downturn forces a strategic reassessment. “Dip buying has worked remarkably well over the past few years,” he said. “But history shows us that no strategy works forever.”
In this environment, von Ahlen is advocating for a more defensive and selective investment approach. Instead of deploying capital broadly across the equity market, he is recommending a focus on sectors with more resilient earnings characteristics, including utilities, consumer staples, and healthcare. These sectors have traditionally provided stability during economic slowdowns, offering both lower volatility and more predictable cash flow.
Von Ahlen also sees structural shifts ahead in fixed income markets. He argues that investors are underestimating the risk of higher inflation over the medium term, particularly given the current pricing in Treasury Inflation-Protected Securities (TIPS). “Long-term inflation expectations remain anchored at levels that don’t fully reflect the policy risks and structural frictions now in play,” he said. He encourages clients to consider increasing exposure to long-duration inflation-linked bonds as a hedge.
For wealth advisors, the implications of von Ahlen’s analysis are multi-dimensional. On the portfolio level, it’s a call to reassess risk exposure, reduce cyclical sector bets, and evaluate downside protection. It also reinforces the importance of proactive client communication — helping investors understand that recent volatility may not be a short-term blip, but the early phase of a more extended dislocation.
Clients accustomed to a decade of accommodative monetary policy and upward-trending markets may need to adjust their expectations. If fiscal drag, policy missteps, and labor market headwinds converge, the next recession could arrive faster and feel harsher than anticipated — particularly for households and businesses operating with thin margins.
Von Ahlen’s bottom line is that the current market setup is fraught with tail risks that are not being fully appreciated by investors. While markets have begun to price in some downside, they remain disconnected from the deteriorating macro backdrop. “This is not a time for complacency,” he wrote. “It’s a time to protect portfolios, manage downside risk, and reassess asset allocation with an eye on resilience.”
For RIAs and wealth managers navigating this environment, the message is clear: diversify strategically, lean into quality and defensiveness, and prepare clients for a potentially more volatile and uncertain economic path ahead. Whether or not the U.S. economy formally enters a recession in the coming quarters, the market narrative is shifting. Those who acknowledge the warning signs and act with discipline may be best positioned to guide clients through what could be a pivotal phase in the cycle.
