Mark Zandi, chief economist at Moody’s Analytics, has been one of the more persistent voices warning about rising recession risks. Over the past several weeks, his messaging has grown sharper, and his latest assessment places the odds of a U.S. downturn at what he describes as an “uncomfortably high” level. For advisors and RIAs guiding clients through a complex macroeconomic environment, his analysis provides important context for portfolio positioning, risk management, and client communication.
In August, Zandi characterized the economy as standing on the “precipice of recession.” His language underscored how narrow the margin of safety feels in the current cycle. Shortly thereafter, in a conversation with Business Insider, he reiterated the same view—describing the U.S. economy as perched at the edge of a cliff. For advisors, such language can sound dramatic, but it reflects the precarious balance between slowing growth and still-tight monetary conditions.
Zandi’s most recent update may be his starkest yet. Over the weekend, he used a series of posts on X (formerly Twitter) to flag new data points that, in his view, materially increase the risk of contraction. According to Moody’s Analytics’ recession probability model, the chance of the U.S. entering a recession within the next 12 months now stands at 48%. That number carries particular weight because of its historical context: never before has the probability been this elevated without a recession following. In other words, while technically shy of a coin flip, the historical precedent makes the signal unusually troubling.
Reading Between the Lines: What 48% Really Means for Advisors
For RIAs and wealth managers, the number itself—48%—matters less than the underlying trend. A probability approaching 50% indicates that risk management should be front of mind, especially for client portfolios heavily exposed to cyclical industries or sectors reliant on discretionary spending. Zandi’s framing also challenges advisors to rethink the typical narrative. While most investors are conditioned to believe that recessions follow once probabilities rise above 50%, the history that Zandi references suggests the critical threshold is actually lower.
This should serve as a reminder that waiting for certainty before adjusting client strategies is rarely prudent. By the time recession risk becomes obvious in the headlines, asset markets often have already repriced.
The Housing Market as a Leading Signal
Zandi grounds much of his concern in housing-related data. Specifically, he points to residential building permits, one of the most reliable leading indicators for recession forecasting. Permits have held up reasonably well until recently, but the backdrop is deteriorating. The inventory of unsold homes is climbing as buyer demand weakens under the pressure of high mortgage rates and affordability challenges. Builders, responding to softer demand, are pulling back.
According to Zandi, new permits are now drifting toward levels not seen since the depths of the pandemic. For advisors, this metric deserves close attention because of its broader economic implications. Housing is not just a sector—it is a powerful multiplier. When home construction slows, ripple effects spread into labor markets, durable goods demand, and household spending patterns. Historically, prolonged weakness in building permits has preceded recessions with a high degree of reliability.
Zandi emphasized the importance of the August building permit data, scheduled for release on Wednesday, September 17—the same day as the upcoming Federal Open Market Committee (FOMC) meeting. He anticipates that the report will provide yet another justification for the Fed to announce a rate cut later that day.
The Fed’s Role in the Recession Debate
For months, markets have priced in expectations of rate cuts as inflation pressures have eased. Zandi agrees that the Fed will likely cut at its September meeting, but he has repeatedly warned that this move, while helpful, may not be sufficient to stave off a downturn.
For wealth managers, this underscores the limitations of relying solely on Fed policy as a backstop. Historically, rate cuts delivered late in the cycle can cushion but not necessarily prevent a recession. In fact, many recessions have followed soon after the Fed’s initial easing moves, as rate cuts often reflect recognition that growth is already faltering.
Advisors should be cautious about positioning client portfolios too aggressively on the assumption that rate cuts alone will revive risk appetite. Fixed income allocations, particularly in high-quality duration, may still provide meaningful ballast if the slowdown materializes. Conversely, credit-sensitive assets—especially high yield—could face stress if recession risk climbs further.
The Client Conversation: Framing Recession Risk Constructively
Recession talk inevitably triggers anxiety among clients, many of whom still vividly remember the shocks of 2008 or the rapid collapse in early 2020. Advisors must strike a balance between acknowledging heightened risks and providing context that prevents overreaction.
Zandi’s 48% probability does not mean recession is inevitable, but it does mean advisors should prepare clients for a wider range of possible outcomes. That preparation can take several forms:
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Stress-testing portfolios against recession scenarios, including equity drawdowns and widening credit spreads.
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Rebalancing risk exposures toward higher-quality assets and defensive equity sectors.
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Revisiting client goals and liquidity needs, ensuring that clients who may need cash in the next 12–24 months are insulated from market volatility.
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Communicating historical perspective, reminding clients that recessions are part of the normal business cycle and that disciplined planning helps weather downturns.
Housing as a Key Client Talking Point
Because housing touches both the economy and everyday experience, it can serve as an effective bridge for client conversations. Clients who see headlines about falling building permits or weakening home sales often connect those signals directly to the broader economy. Advisors can use this as an opportunity to explain how such indicators feed into recession probability models and why housing serves as an early warning system.
By framing the discussion around tangible data like building permits, advisors can help clients move beyond vague fears of “recession” toward a clearer understanding of what indicators matter most and how they translate into portfolio implications.
Beyond Housing: Other Data to Watch
While Zandi’s latest warning zeroes in on permits, advisors should also monitor other forward-looking indicators:
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The yield curve, which remains inverted in several key maturities. Historically, inversions have preceded recessions with long and variable lags.
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Labor market trends, particularly initial unemployment claims, which often turn before headline job growth weakens.
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Corporate earnings revisions, which may signal whether demand softening is beginning to pressure profitability.
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Consumer sentiment, which can feed directly into spending behavior, especially in discretionary categories.
Advisors who integrate these leading indicators into client updates can differentiate themselves by showing proactive monitoring rather than reactive explanations.
Positioning Strategies in a 48% World
When recession probabilities climb near 50%, advisors often face a familiar dilemma: Should they reposition portfolios defensively now, or wait for clearer confirmation? The reality is that effective strategies do not require binary decisions. Instead, advisors can pursue incremental adjustments that reduce downside risk without abandoning growth exposure entirely.
Some possible positioning approaches include:
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Tilt toward quality in both equities and fixed income. Companies with strong balance sheets and durable cash flows tend to outperform during downturns.
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Favor defensive sectors such as health care, utilities, and consumer staples.
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Evaluate duration exposure, as longer Treasuries often rally once the Fed cuts rates and recession fears intensify.
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Revisit alternatives, including strategies designed to provide diversification away from traditional stock/bond correlations.
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Maintain liquidity buffers for opportunistic rebalancing if markets overshoot to the downside.
Zandi’s warning may or may not prove prescient in exact timing, but his framework provides a useful reminder: recession probabilities matter most when they force advisors and clients to plan ahead rather than react under stress.
The Long Game: Building Resilient Portfolios
Even if the U.S. avoids recession this time, the lesson for RIAs and wealth advisors remains the same. Cyclical risks are an unavoidable part of investing, but portfolios designed with resilience in mind can help clients navigate uncertainty with confidence.
Zandi’s latest projection of 48% recession risk underscores the fragility of the current expansion. Whether the downturn arrives in the next 12 months or not, advisors who use this moment to stress-test strategies, refine client communication, and strengthen risk management will be better positioned.
At the same time, recession risk should not be equated with inevitability. The economy retains areas of strength—consumer balance sheets remain relatively healthy, corporate default rates are not yet spiking, and fiscal stimulus continues to provide some support. But the fact that a seasoned economist like Zandi describes the situation as the “edge of a cliff” is a reminder that the margin for error is slim.
Closing Thought for Advisors
For clients, the idea of an “uncomfortably high” probability of recession may trigger emotional responses. For advisors, however, it should trigger action—not panic, but preparation. Whether through adjusting allocations, refining planning conversations, or proactively monitoring leading indicators, advisors have an opportunity to translate macroeconomic uncertainty into value for clients.
Mark Zandi may not be right on timing, but his warning is a clear call for vigilance. Advisors who heed it can help clients navigate what could be a pivotal period in the market cycle—one where preparation and discipline may make the difference between weathering volatility calmly or being caught off guard.
