For more than two years, bearish forecasters have been warning that the U.S. economy was on the brink of collapse. Yet each prediction of an imminent recession or market crash has failed to materialize. Despite higher interest rates, a tariff-driven trade environment, and persistent inflation anxiety, the U.S. economy continues to defy expectations—and the stock market keeps powering higher.
Since October 2022, the S&P 500 has surged 87%, leaving many investors who heeded the doomsayers’ warnings sitting on the sidelines. For wealth advisors and RIAs, the resilience of both the economy and markets offers an important reminder: narratives built around fear can be costly, and disciplined, data-driven portfolio management continues to outperform emotional decision-making.
A Long String of Missed Calls
The pessimistic consensus began forming in early 2022, when the Federal Reserve’s aggressive rate hikes were expected to push the economy into a deep recession. When that didn’t happen, the next bearish catalyst was supposed to be tariffs—a historic rise in average rates under the Trump administration’s new trade policy that many economists said would crush consumer demand and corporate margins.
Yet neither scenario came to pass. The economy absorbed the shock and kept expanding, driven by a strong labor market, resilient consumer spending, and record levels of fiscal and private-sector investment.
Even as inflation and tariffs created pockets of pressure, overall growth remained positive. The much-predicted “hard landing” became a “soft landing,” and then, as months passed, no landing at all.
“The consensus has been wrong since January,” wrote Torsten Sløk, chief economist at Apollo, in a note titled ‘We in the Economics Profession Need to Look Ourselves in the Mirror.’ “The forecast for the past nine months has been that the U.S. economy would slow down. But the reality is that it has simply not happened.”
Sløk, who himself had projected a pickup in inflation heading into the end of the year, said that many in the economics community have misjudged the durability of the post-pandemic expansion. “The bottom line,” he wrote, “is that the U.S. economy remains remarkably resilient, and it’s becoming increasingly difficult to argue that we are still waiting for delayed negative effects of what happened six months ago.”
For advisors who have been navigating client anxiety over these recurring doom narratives, the message is clear: markets move on fundamentals, not forecasts.
When Recession Indicators Fail to Deliver
The persistent failure of widely followed recession indicators has also forced many analysts to rethink how they interpret traditional warning signs.
The inverted Treasury yield curve—long regarded as a near-foolproof predictor of downturns—has been flashing red since mid-2022. The Sahm Rule, another historically reliable measure, signaled a slowdown earlier this year. The Conference Board’s Leading Economic Index also declined for months, reinforcing the bearish narrative.
And yet, the economy continues to expand. Corporate profits remain robust, consumer balance sheets are relatively strong, and housing activity—while cooling—has not collapsed.
For RIAs, this disconnect raises an important question about how to contextualize macro data for clients. The old playbook, which relied on yield curve inversions or leading indicators as definitive signals, may no longer apply in a structurally different post-pandemic economy. Massive fiscal stimulus, reshoring of supply chains, and the digital productivity boom are all reshaping traditional business cycles.
In this environment, advisors need to help clients interpret macro indicators as one input among many—not as deterministic predictors of market direction.
The Value of Contrarian Thinking
Bearish voices still play an essential role in market discourse. In an industry often dominated by optimism, contrarian perspectives act as a necessary counterbalance.
Albert Edwards, a veteran strategist known for his bearish outlook, told Business Insider earlier this year that even bullish investors appreciate the value of skepticism. “A lot of clients who totally disagree with me like to read my stuff,” he said. “It’s a reality check.”
For advisors, maintaining exposure to alternative viewpoints can be healthy—so long as it doesn’t lead to paralysis or fear-based decision-making. Understanding the arguments of the bears helps stress-test portfolio assumptions and risk exposures. But history shows that acting exclusively on recession calls or doomsday predictions often leads to underperformance.
The challenge is striking the right balance between prudence and participation—remaining alert to downside risks while staying invested enough to capture upside momentum.
The Real Risks Ahead
While the economy has so far proven remarkably resilient, there are still legitimate concerns that advisors should monitor. Chief among them is the softening labor market.
Monthly nonfarm payroll growth has slowed to levels typically associated with late-cycle expansions. The Bureau of Labor Statistics was unable to release September’s data due to the government shutdown, but private payroll data from ADP indicated that the economy lost 32,000 jobs last month.
If confirmed, that would mark the weakest labor reading since early 2020.
A sustained decline in employment could eventually weigh on consumer spending and sentiment. For now, however, wage growth remains positive and layoffs are contained—suggesting a gradual cooling rather than an abrupt contraction.
Still, advisors should be mindful of how labor trends interact with monetary policy. If the Federal Reserve perceives the slowdown as a necessary rebalancing, it may continue to maintain restrictive rates longer than markets expect. On the other hand, if job losses accelerate sharply, rate cuts could arrive sooner, triggering renewed market volatility.
In either case, maintaining diversified exposure and liquidity will be essential.
Why Fear Fatigue Has Taken Hold
Despite lingering risks, markets are signaling fatigue with perpetual doom narratives. Investors seem increasingly unwilling to anchor their expectations to a recession that never arrives.
Jeff Muhlenkamp, portfolio manager at Muhlenkamp & Company, summed up the shift in sentiment: “Over time, if you fear something and it doesn’t happen, it’s hard to hold onto that fear. Six months is about the limit in markets. So the fear of recession dominated a year ago, six months ago, but without further validation, market participants changed their minds.”
That psychological shift has been crucial to the market’s resilience. As investors shed fear-based positioning—hoarding cash, avoiding equities, delaying reentry—the resulting inflows have helped sustain the rally. The market’s ability to “climb a wall of worry” remains one of its most reliable traits.
For RIAs, this change in sentiment offers a strategic window to reset client expectations. Investors who have missed the rally out of caution may be looking for opportunities to reenter. Advisors can play a key role in rebuilding confidence—emphasizing long-term allocation discipline and helping clients understand that market timing based on macro fear almost always backfires.
Positioning for the Next Phase
The persistence of growth in the face of tightening conditions suggests that the U.S. economy may be undergoing a structural transformation rather than a cyclical rebound. Fiscal stimulus, supply-chain reshoring, and technological innovation—especially in AI, automation, and energy—are contributing to productivity gains that could extend this expansion well into 2026.
For advisors, that means portfolio strategy should remain dynamic but not reactionary. A few key takeaways for the current environment:
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Stay invested, but rebalance actively. Use volatility to trim overvalued positions and add exposure where fundamentals remain strong.
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Diversify globally and across asset classes. U.S. large-cap dominance may continue, but emerging markets and small-cap sectors could benefit as capital broadens out.
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Focus on earnings quality. In a slower-growth environment, cash flow stability, strong balance sheets, and pricing power become critical.
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Manage expectations. Help clients understand that slower GDP growth doesn’t necessarily mean poor equity performance—especially when inflation stabilizes and rates plateau.
Advisors who maintain a forward-looking, evidence-based approach can turn market uncertainty into opportunity.
A Time for Reflection, Not Capitulation
Torsten Sløk’s call for economists to “look in the mirror” is equally applicable to market professionals. The repeated failure of bearish forecasts invites a broader conversation about how investors and advisors process macroeconomic signals.
It’s easy to fall into pattern recognition—assuming that because a yield curve inversion or policy shock preceded past recessions, the same outcome is inevitable today. But economic structures evolve, and the post-pandemic economy is operating under different rules: stronger household balance sheets, unprecedented fiscal support, and a global shift toward investment in digital and physical infrastructure.
For RIAs, this evolution underscores the need to continually reassess models, inputs, and assumptions. Advisors who cling to outdated frameworks risk misjudging the direction of both markets and client sentiment. Those who adapt—incorporating real-time data, new economic drivers, and behavioral insight—will be best positioned to guide clients effectively through uncertainty.
The Bottom Line
Bearish predictions have their place. They remind markets that risk exists and keep valuations grounded. But for now, the economic and market reality simply doesn’t match the pessimistic narrative.
The U.S. economy remains resilient, corporate earnings are steady, and market breadth is improving. Advisors who stayed invested and focused on fundamentals have been rewarded. Those who gave in to fear have missed one of the strongest bull runs in recent history.
As the cycle evolves, the key challenge for advisors will be maintaining conviction without complacency—acknowledging potential risks while staying anchored in data, not headlines.
The past two years have proven that markets often defy prediction. For wealth advisors guiding clients through that paradox, the best strategy remains timeless: stay diversified, stay patient, and never let fear dictate investment policy.
