President Donald Trump’s reversal of the Liberation Day tariffs may have helped the U.S. dodge a severe economic downturn, but UBS is warning that recession risks are mounting again, driven by a troubling mix of economic indicators.
UBS economists reported a 46% chance of a recession based on their hard data model, which flagged a broad-based decline across several key economic indicators in April—areas such as industrial production, employment, capital spending, housing, income, and consumer expenditures.
After showing some improvement earlier in the year, UBS’s composite measure of economic fundamentals dropped sharply last month. Analysts noted the 12-point rise in recession probability was possibly influenced by early tariff-related activity, but emphasized the weakness was broad and persistent.
Another concern is the yield curve, a traditional predictor of economic downturns. UBS noted its yield curve model now shows an 18% chance of a recession—a modest increase but not yet signaling full-blown alarm.
Even more worrying is UBS’s credit-based model, which now assigns a 48% probability to a recession, the highest since the pandemic, pointing to rising financial stress in the credit markets.
Altogether, UBS’s combined recession risk measure has climbed to 37%, up from 26% in December—levels the bank considers typical ahead of a recession.
While the U.S. economy began 2025 on stable ground, UBS analysts cautioned that continued weakening data could reignite recession fears. “The risks may be manageable for now,” they noted, “but if the downtrend continues, market sentiment could turn sharply negative.”
