• Barclays reverses its earlier mild recession forecast for the US in H2 2025, citing reduced risks despite lingering trade uncertainties.
  • The bank now expects weakening growth but no outright contraction, aligning with a broader market shift away from recession fears.
  • Global growth projections for 2025 were trimmed to 2.9%, reflecting persistent trade policy concerns.

A More Optimistic Stance

Barclays has walked back its earlier warning of a mild US recession in the second half of 2025, now projecting slower growth rather than contraction. The revision comes amid stabilizing economic indicators, though trade tensions and tariff risks remain key concerns.

"While risks persist, the base case no longer includes a recession," said a Barclays strategist familiar with the updated forecast. The bank had previously cautioned that escalating trade disputes could tip the US into a downturn, but recent data suggests resilience in consumer spending and labor markets.

Global Growth Adjustments

The bank also lowered its global growth forecast for 2025 to 2.9%, down from 3.3% in 2024, attributing the slowdown to unresolved trade policy uncertainty. Investors have shifted toward fixed income over equities, reflecting heightened caution despite the improved US outlook.

Barclays’ updated stance mirrors a broader recalibration among economists, many of whom have dialed back recession probabilities in favor of a "soft landing" narrative. Still, analysts warn that unexpected policy shifts—particularly around tariffs—could reintroduce volatility.

Market Implications

The revision signals cautious optimism, but Barclays emphasized that its investment strategy remains defensive. The bank continues to favor fixed income, citing stretched valuations in risk assets. "Markets may be underestimating the potential for disruption if trade tensions flare again," the strategist added.

Barclays’ 2024 performance—£8.1 billion in pre-tax profit—underscores its stability amid fluctuating economic conditions. The bank aims for a Return on Tangible Equity (RoTE) above 12% by 2026, a target that hinges on navigating persistent macroeconomic headwinds.