Boston College Economist Analyzes Stock Market Drop and Recession Fears

SANTA BARBARA, Calif. — U.S. stocks plunged Monday as Wall Street’s fears reached their highest level this year, with concerns over President Donald Trump’s economic policy triggering a widespread market selloff.

The S&P 500 tumbled 2.7%, briefly reaching its lowest point since September before settling at 5,614.56. The Nasdaq Composite, known for its concentration of technology stocks, experienced the steepest drop among major indexes, plunging 4%—marking its worst trading session since September 2022—and closing at 17,468.32. Meanwhile, the Dow Jones Industrial Average slid 890.01 points, or 2.08%, finishing at 41,911.71.

“The market is essentially jittery,” said Aleksandar (Sasha) Tomic, associate dean for strategy, innovation and technology at Boston College’s Woods College and an associate professor of economics at Morrissey College. “There is a lot of uncertainty as to what exactly is happening with the tariffs, when they will be imposed and how long they will last.”

Speaking on Fox News’ Sunday Morning Futures With Maria Bartiromo, Trump was asked whether he anticipated a recession in the coming year. He responded, “I hate to predict things like that. There is a period of transition because what we’re doing is very big.”

Tomic noted that many analysts initially believed Trump would scale back tariffs once their economic effects became clear. However, Trump’s recent remarks suggest he is willing to endure a potential recession to maintain his tariff strategy. That uncertainty, along with a negative outlook on tariffs, has contributed to the market selloff seen in recent trading sessions.

Defining a Recession: Are We There Yet?

As concerns about a potential recession grow, Tomic explained what constitutes a recession and how economists determine when one has begun.

“To be clear, it’s very difficult to know when we are in a recession,” he said. “The National Bureau of Economic Research has a committee of economists that typically tells us months after the fact that we were in a recession.”

While a recession is broadly defined as a prolonged economic slowdown lasting several months, there is no single technical definition. Some indicators include two consecutive quarters of negative economic growth and tools such as the Sahm Rule, which helps detect downturns.

“None of these indicators currently show that we are in a recession,” Tomic said. “However, some leading indicators—such as consumer confidence and the Conference Board’s Leading Economic Index—are flashing red.”

Consumer confidence, which measures optimism about the economy’s future, has declined, and the Conference Board’s index dropped in January compared to December. Tomic noted that leading indicators shift before the broader economy does, and while they suggest a possible recession, current data does not confirm one.

“Right now, nothing is pointing to us currently being in a recession, but there are fears that we will enter one,” he said, citing uncertainty over tariffs and their potential impact.

Comparing a Potential Recession to the 2007-09 Financial Crisis

If the economy does enter a recession, Tomic expects it to be markedly different from the Great Recession of 2007-09. One key risk, he said, is stagflation—a rare economic condition characterized by both inflation and slow growth—something the U.S. has not experienced in over 40 years.

“This time, we are looking at the possibility of stagflation,” he said. “Higher unemployment, but probably accompanied by higher prices due to tariffs.”

Despite concerns, Tomic does not anticipate a downturn as severe as the 2007-09 crisis, which was triggered by a financial sector meltdown.

“I don’t think we have as much leverage in the system as we did back then,” he said. “It’s simply not that big of an event.”

Instead, he predicts a more typical recession, where economic conditions gradually deteriorate, leading to increased unemployment and rising costs.

While the future remains uncertain, Tomic emphasized that much depends on how and when tariffs are implemented and whether exemptions are granted for certain industries.