Lacy Hunt: The Economy Is "Far Worse" Than Wall Street Thinks. Recession Odds Are Actually Over 50%

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**Lacy Hunt** (0:56)
The economy is far weaker than is generally understood. I realize that the active marketplaces on recession predictions have fallen way off.
I would bet against that. I think the recession risks are better than 50-50. And I believe that that's being confirmed now increasingly by the hard data. So the economy is facing increasing and is now exhibiting increasing signs of pain. And there's no real stimulus coming in to offset it, at least for the near term, as far as I can see.

**Adam Taggart** (1:47)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. It's an especially confusing time for investors. On one hand, the US economy is showing signs of slowing, with a negative growth rate for Q1 GDP and mounting evidence that many corporations and consumer households are feeling the pinch of higher borrowing costs. On the other hand, FOMO is returning to the stock market as corporate earnings look solid, tariff tensions ease somewhat, and optimism over the longer term impact that the Trump administration's business-friendly policies may have on the economy grows. So what's more warranted here, optimism or pessimism? For perspective, we've got the great fortune today to sit down with one of the greatest living economists, Dr. Lacy Hunt, former Senior Economist for the Federal Reserve Bank of Dallas and current Executive Vice President of Hoisington Investment Management Company. Lacy, thanks so much for joining us today.

**Lacy Hunt** (2:44)
Glad to be with you, Adam, always a pleasure.

**Adam Taggart** (2:46)
Thank you, Lacy. Well, look, the pleasure is most definitely mine. But it's wonderful to see you. You look great, my friend. There's a lot to talk about today, which we already sort of addressed here before we turned on the camera. So let's just jump straight into it. Before I get to some of the specific news that I want your reaction to, Lacy, just at a high level, what's your current assessment of the economy and the financial markets?

**Lacy Hunt** (3:07)
It's far weaker. The economy is far weaker than is generally understood. I realize that the active market places on recession predictions have fallen way off.
I would bet against that. I think the recession risks are better than 50-50. And I believe that that's being confirmed now increasingly by the hard data. And that the economy has a very difficult walk here ahead of it.

**Adam Taggart** (3:40)
Okay, so it's interesting. So US. Treasury Secretary Scott Bessent, whenever he's sort of probed by the media, he says, well, look, the soft data has been bad. But he says the hard data doesn't look so bad. And I'm going to stick with the hard data until anything changes. You're beginning to see cracks in the hard data, it sounds like.

**Lacy Hunt** (4:01)
I think so, and the revised National Income and Product Accounts for the first quarter show deterioration, significant deterioration in my aspect. One of the things that economists like to look for is to compare what's happening to GDP and GDI, Gross Domestic Product and Income. And so we now have the first estimate for GDI, and it declined 0.2% in the first quarter. And to me, it's more meaningful when they're both lined up than when they diverge. When they diverge, one has to try to figure out which is more reliable. But in this case, we don't.
Another very critical aspect of the first quarter is that the Bureau of Economic Analysis is showing that consumer expenditures were far weaker in the first quarter than originally reported. They grew only 1.2%. That's a downward revision of 6.0% of a percentage point. Huge, huge downward revision. And in my view, it's not surprising because I think the consumer is under pressure. And the consumer loan rates are really not affordable and they're not reasonable.