For wealth advisors and RIAs managing client portfolios amid heightened volatility, the recent sell-off in equities and the reintroduction of tariffs under President Trump’s proposed policies have reignited fears of a U.S. recession in 2025.
However, Wells Fargo’s latest economic outlook presents a more tempered and strategic perspective: while risks are elevated, several foundational strengths in the economy suggest a full-blown recession is not a foregone conclusion.
Despite revising its GDP forecast lower, Wells Fargo emphasizes that the underlying economic data remains resilient. The bank frames early 2025 weakness as a natural cooling period following the exceptional momentum of 2024.
Importantly for advisors, the message is not one of denial, but of balanced vigilance — recognizing the slowdown, yet identifying key supports that could underpin a second-half recovery.
Here are four indicators that suggest the economy may sidestep a recession — insights that wealth professionals can use to help clients maintain long-term focus and avoid reactive portfolio shifts.
1. Real Income Growth Continues to Support Spending
Despite a deceleration in consumer spending, inflation-adjusted disposable income continues to rise. The Federal Reserve reports that real disposable personal income reached a record high in Q4 2024. This is particularly significant for wealth managers tracking household consumption trends — a primary driver of GDP.
Meanwhile, the labor market remains a critical pillar of strength. February’s job report showed an increase of 228,000 nonfarm payrolls, with the unemployment rate hovering near historic lows. With labor participation healthy and wage growth stable, consumer purchasing power remains intact. For advisors, this suggests continued support for sectors tied to domestic demand and consumer confidence.
2. Household Net Worth Is Elevated
Equity markets have faced sharp corrections, with the S&P 500 and Nasdaq 100 dipping into bear territory. Yet the broader picture of household wealth remains solid. U.S. household net worth reached an all-time high of $160 trillion at the end of 2024, according to Federal Reserve data.
This elevated wealth position, especially among higher-income households, offers a cushion against market turbulence. It also supports discretionary spending — a key component of growth. Wells Fargo notes that past gains in equities and other financial assets have left consumers, particularly those with investment income, with the means to maintain lifestyle spending, especially as seasonal demand rises into spring and summer. RIAs may find this an important point to reinforce with clients concerned about short-term drawdowns.
3. Easing Long-Term Rates Improve Credit Conditions
Interest rates are retreating from last year’s highs, providing relief to interest-sensitive sectors such as housing and durable goods. The yield on the 10-year Treasury note fell to its lowest level since October, signaling an easing of long-term borrowing costs.
Mortgage rates also ticked down to 6.6%, well below their 2023 peak. For clients exploring real estate investments or refinancing, this is a key window of opportunity. Wells Fargo reports that the decline in rates has helped stabilize housing and credit markets — sectors often viewed as early indicators of economic stress.
From a portfolio strategy perspective, this could support a cautiously optimistic stance on fixed income and real assets, with duration risk now looking more favorable.
4. Market Liquidity Is Still Supportive
While liquidity has moderated from pandemic-era highs, Wells Fargo emphasizes that financial markets remain far more liquid than during previous pre-recession periods. Bank reserves are robust, and credit spreads remain contained — both signals that systemic financial stress is not imminent.
For wealth advisors, this speaks to the relative health of the financial system. Despite recent equity volatility and negative investor sentiment — the AAII survey shows 61% of respondents are bearish on the six-month outlook — liquidity conditions do not yet reflect crisis-level dislocation.
In contrast, other major institutions like Goldman Sachs and JPMorgan have raised their recession probabilities, citing tariff-related shocks and geopolitical tensions as key risks. However, Wells Fargo’s more nuanced analysis offers a framework to help clients avoid panic-driven decisions and stay anchored in fundamentals.
Bottom Line for RIAs
As 2025 unfolds, the case for a moderate slowdown rather than a severe contraction is still viable. Income growth, elevated household wealth, easing rates, and stable financial conditions provide credible counterweights to recession fears. Wealth advisors should use this period to reinforce diversified strategies, reevaluate tactical allocations in light of changing rate dynamics, and help clients navigate noise with data-driven clarity.
The message to clients? Stay informed, not alarmed — and keep long-term goals in focus.
