In times of economic uncertainty, entrusting your investments to the right wealth manager is critical. SCM Direct and sister company MoneyShe, under the stewardship of Chief Investment Officer Alan Miller, consistently demonstrates expertise and insight crucial to navigating today’s challenging investment landscape.
This was demonstrated in our latest Quarterly Investment Webinar hosted on 4th June 2025 entitled Is a US Recession Coming? As global markets ride waves of uncertainty, and the risk of a US recession looming large on investors’ minds, our Chief Investment Officer, Alan Miller, provided detailed insights into the current US recession probabilities, explaining the significance of indicators such as yield curves, market-based models, and economic surveys. He unpacked the data, models, and market signals with his signature clarity and evidence-based insight.
Here’s what you need to know:
What’s the Risk of a Recession in 2025?
While the term “recession” can trigger panic, Alan began by reminding us that its official definition includes more than two quarters of negative GDP. In reality, the US recession risk is nuanced, with probabilities ranging from 20% to 40%, depending on the model you use.
How Do We Measure Recession Risk?
MoneyShe evaluates multiple indicators:
- Yield curve inversions: Still one of the most powerful predictors.
- Market-based models: Including CEO sentiment and S&P 500 drawdowns.
- Economic surveys: From business confidence to forward-looking nowcasts.
A particularly noteworthy measure, the nominal near-term forward spread (NTFS), offers an enhanced signal. This model outperforms traditional long/short yield spreads in predicting near-term economic activity.
Markets vs. the Economy: A Misunderstood Relationship
Contrary to many commentaries, the historical correlation between GDP and stock market returns is weak – just +0.22 between 1995–2024. Why? Markets are forward-looking and often rebound before the economy does.
In other words: don’t mistake bad economic news for poor future market returns.
US Periods of GDP Decline (1995–2025) – Economic and Market Impact
Portfolio Strategy: Stay Diversified and Disciplined
MoneyShe’s data shows that diversified portfolios weather recessions better. Defensive assets like bonds and gold can offset equity declines, and diversified portfolios tend to recover faster post-recession.
Alan stressed:
- Don’t try to time the market — it’s infamously difficult.
- Stick to strategic asset allocation.
- Keep an eye on early warning signs (e.g., yield curves, volatility).
Chart Spotlight: Historical Valuations and Market Risk
The slide below from the webinar underlines how current US equity valuations are nearing historical highs, similar to the levels seen during the dot-com bubble of 2000. The valuation metric shown averages long-term real earnings to remove cyclicality — a method that smooths out temporary market noise and offers a clearer picture of underlying value.
What it means for investors:
- Caution is warranted — high valuations suggest future returns may be more muted.
- Diversification into international markets and bonds, where valuations are more reasonable, can reduce overall portfolio risk.
Looking Ahead: Market Outlook & Valuations
While US equity valuations are approaching historic highs, MoneyShe portfolios remain balanced across undervalued regions and asset classes. The US no longer dominates global returns – emerging markets and non-US equities are gaining ground, buoyed by a weaker dollar and more attractive fundamentals.
Why Choose MoneyShe
Navigating Recession Risks with Expertise
MoneyShe’s Investment Team, led by Alan Miller, has decades of experience successfully guiding portfolios through economic downturns. Our expertise includes leveraging nuanced forecasting tools such as the inverted yield curve, a historically reliable predictor of US recessions, and enhanced models like the nominal near-term forward spread (NTFS), providing superior predictive capabilities for economic activity. By closely monitoring these sophisticated indicators, MoneyShe ensures proactive portfolio adjustments that help safeguard our clients’ investments.
Expertise in Risk Management
MoneyShe’s risk management strategy is meticulous. We prioritise diversification, effectively cushioning portfolios during downturns and facilitating quicker recoveries when market conditions stabilise. Our disciplined approach avoids risky market timing in favour of strategic asset allocation, continuously monitoring critical indicators such as yield curves and market volatility to manage investment risks proactively.
Consistent Outperformance and Transparency
Our transparent reporting underscores MoneyShe’s consistent long-term performance across diverse investment strategies – including our Absolute Return, Long-Term Growth, and Ethical (ESG) portfolios. These strategies consistently outperform typical private client returns, and our reported results, net of all fees, reflect our unwavering commitment to transparency and honesty.
Thoughtful Insights on Valuations and Market Dynamics
MoneyShe continuously evaluates asset valuations, transparently identifying both opportunities and risks. Our latest insights highlight historically high US equity valuations and emerging market opportunities benefiting from a weaker US dollar, enabling informed decision-making even in volatile markets.
Cost Efficiency and Investor Alignment
MoneyShe’s efficient business model passes economies of scale directly to our clients, resulting in lower fees without sacrificing quality. This approach ensures your investment capital consistently works harder, delivering optimal long-term value.
Conclusion: A Partner You Can Trust
With uncertainty set to continue as the geopolitical landscape shifts, not least because of four more years of President Trump’s administration, MoneyShe’s comprehensive, insightful, and disciplined approach, coupled with deep economic expertise and a proven track record, means our clients trust us to navigate the complexities of uncertain economic climates. We do the day-to-day proactive management of your wealth, helping you achieve sustained financial growth and security.
Final Thought from Alan Miller
“Uncertainty is uncomfortable, but not unmanageable. Investors should stay focused, diversified, and data informed. At MoneyShe, we’ll continue to help clients make smart, low-cost investment decisions — no matter the economic weather.”
To request a copy of the presentation, arrange a meeting with one of our Investment Team, contact Zoe Brady, Client Relationship Manager – zoe@moneyshe.com
