Is a US recession really on the way?

US recession calls are growing louder, but the labour market, earnings, spending and commodity signals tell a very different story – and that matters for ASX investors.

I saw a market strategist appear in the Australian Financial Review the other day suggesting that the US economy would be, in his view, in recession by the first quarter of 2026. That’s the craziest conclusion I’ve heard in a while. Unfortunately, there wasn’t any data shared in the report as to why he thinks like this. It’s hard to tell how we can be looking at the same country. But that’s what makes a market, I suppose. A US recession would hit the ASX, so we want to get this right.

Why the recession call looks off

Let’s begin with unemployment. It’s currently 4.4% in the USA. That is still historically very low. The Economist adds that the number of 24–54 year olds working is at around 80%, almost the highest ever. Charlie Bilello over at his popular blog says that US wages have outpaced reported inflation on a year-on-year basis for 29 straight months.

Then we have the wonderful institution called the US stock market. It’s designed to discount future business decisions. Right now, the S&P 500 is about 1% off its all-time high. That’s hardly enough to keep us awake at night. We just went through the latest earnings results for corporate America. Quarterly earnings were up 13% and beat expectations easily.

Then we have the massive capital expenditure happening across the country via the hyperscalers and the AI thematic. It could be the equivalent of 2% of US GDP in 2026. On top of that, we have the US government running a huge deficit, possibly as high as US$2 trillion (6% of GDP) over the next 12 months.

What markets are signalling

Copper traders seem to like the outlook. The price just broke an all-time high this week. This metal is colloquially known as “Dr Copper” because the health of the industry is an important source of demand. Those men and women placing their bets this way certainly don’t see a recession.

Neither does this measure of “instant” GDP, which says US economic growth is strong right now.

Anything else? Actually, yes. Donald Trump has made it clear he wants the Fed to lower interest rates, and he’s just about to put a new chairman on the board. I’m not saying this is a good thing. In fact, long-term it may be terrible. But there’s no point fighting momentum when it’s against you. Lower rates, if so, would at least help take mortgage and loan rates down for US consumers.

Right now, the US economy has multiple tailwinds. Certainly, it seems a lot harder to put together a negative case. I’m not saying US stocks are a buy, based on all this, either. It’s possible to have a strong economy and the share market do its own thing. In fact, part of the reason the US stock market is so high right now is that it’s priced in the coming economic strength already.

What this means for Australian investors

I could be wrong, of course. There are no certainties in life or markets. But if the US is going into recession, it’s going to be something that comes out of left field that shocks all of us. Until then, I will keep looking for opportunities in the market. The Australian market has some options that look promising. I’ve talked about the resource sector before. The small-cap sector should keep throwing up ideas too.

You won’t find them if you’re not watching. Don’t waste your time with predictions, especially potential recessions or “macro” calls that may or may not happen, whatever the odds. Day by day is the way we do it here at Marcus Today.