Lacy Hunt: The Economy Is "Far Worse" Than Wall Street Thinks

He calculates recession odds are over 50%

It's an especially confusing time for investors right now.

On one hand, the US economy is showing signs of slowing, with a negative growth 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, tariffs tensions ease somewhat, and optimism over the longer-term likely positive impact the Trump Administration's business-friendly policies will have on the economy.

So, which is more warranted here: optimism or pessimism?

For perspective, we have the great fortune today to sit down with one of the greatest living economists, Lacy Hunt, former senior economist for the Federal Reserve Bank of Dallas and current Executive Vice President of Hoisington Investment Management Company.

Lacy sees Wall Street as dangerously deluded here. In his eyes, the economy is "far worse" than markets are currently expecting — with recession odds higher than 50%.

To find out why, click here or on the video below.

FYI: in this interview, Lacy mentions three free resources he strongly recommends you time the time to read:

1. Banks’ links to private credit could pose systemic risk, says Boston Fed

2. IMF Warns of Vulnerabilities in the Private Lending Industry

3. Niall Ferguson interview: America Is In A Late Republic Stage Like Rome

---

GOT GOLD?: Read our free Guide To Buying and Storing Gold & Silver:

---

I’m so grateful to everyone who has kindly supported me by becoming a premium subscriber to this Substack. It’s making an important difference in helping me fund the substantial operating costs of running Thoughtful Money.

Premium supporters receive my “Adam’s Notes” summaries to the interviews I do, the wildly-popular MacroPass™ rotation of reports from esteemed experts, VIP discounts, plus periodic advance-viewing/exclusive content. My Adam’s Notes for this discussion with Lacy are available to them below.

If you, too, would like to become a premium subscriber to this Substack (it’s only $0.52/day), then sign up now below:

---

Adam’s Notes: Lacy Hunt (recorded 5.29.25)

EXECUTIVE SUMMARY:

• Economic Weakness and Recession Risk: Dr. Lacy Hunt warns the U.S. economy is weaker than perceived, with a >50% recession probability, driven by declining Q1 GDI (-0.2%), weak consumer spending (1.2%), and rising delinquencies (credit cards, autos, mortgages, student loans).

• Corporate Profit Decline: Q1 corporate profits fell $100 billion (3.6%), per BEA data, more reliable than S&P estimates, signaling economic fragility as inventory surges (2.6% GDP contribution) face a weakening consumer.

• Deflationary Pressures Dominate: Contracting money supply (M2, ODL) and tariff-driven demand drops (second-order effects) reinforce deflation over inflation, with Lacy dismissing tariff-related inflation fears as overstated.

• Big Beautiful Bill’s Neutral Impact: The bill extends 2017 tax rates, offering minimal stimulus, with tariffs (potentially 12%, $300 billion/year) offsetting any GDP boost, leaving deficits at 6% of GDP.

• Monetary Policy Too Restrictive: Lacy predicts