Chris Wood, a well-known equity strategist at Jefferies, has released a new Greed and Fear note dated April 24, warning of worsening economic conditions in the United States. According to Wood, parts of the US economy may already be in recession, with growing evidence pointing to slowing consumption, falling earnings revisions, and increased financial stress on American consumers.

One of the central assertions of the report is that the US dollar has started a major decline, not just a minor pullback. Wood believes the recent dollar weakness is not a fluke but a structural correction of an overvaluation that has lasted for too long. He links this to the peak of America’s share in global equities, which occurred in December 2024, comparing the situation to Japan’s market peak in 1989.

The note strongly advises investors to use any rallies in US stock markets to reduce exposure. Instead, Wood urges clients to reallocate capital towards markets in Europe, China, and India, where he sees better economic resilience and more attractive growth opportunities.

He criticises the Trump administration’s stance on China tariffs, arguing that Donald Trump “does not have the cards” to win this trade confrontation. Wood points out that while Trump claims active discussions with China, Beijing continues to deny such talks, standing firm that the removal of existing tariffs is a precondition for any dialogue.

The analysis provides a sobering view of corporate America’s earnings performance, referencing the Citigroup US earnings revision index, which has been negative for 17 consecutive weeks since mid-December. The latest reading, at -0.62 for the week ended April 11, marks the lowest level in five years since April 2020. This index reflects the net revisions to earnings per share (EPS) forecasts, showing more companies being downgraded than upgraded.

Adding to the pessimism, Wood highlights recent findings from the Federal Reserve Bank of Philadelphia, which reported that the number of US credit card borrowers making only minimum payments has reached a 12-year high. This is a worrying sign, as it indicates growing financial strain on average consumers. Similarly, JPMorgan Chase recently disclosed that the portion of credit card loans considered ‘unrecoverable’ has increased to a 13-year high of 3.58% in the first quarter of calendar year 2025.

Wood’s note echoes warnings from major institutions like Goldman Sachs, which recently raised the probability of a US recession in the next 12 months to 35%, and the International Monetary Fund (IMF), which also expressed concerns about a slowdown during its latest economic update.

One of the most striking observations in the Greed and Fear report is the comment that the subprime American consumer has likely been in recession for some time. Wood cites estimates showing that the top 10% of Americans are currently responsible for nearly 50% of total consumption, reflecting a deepening inequality and shrinking spending power of the broader population.

This consumer weakness stands in stark contrast to President Trump’s recent statements on the economy, particularly on his Truth Social account. Trump has argued that the US economy is strong, noting that oil, food prices, and interest rates are down, and that the country is benefitting from tariffs on foreign imports. He wrote, "Oil prices are down, interest rates are down (the slow moving Fed should cut rates!), food prices are down, there is NO INFLATION, and the long time abused USA is bringing in Billions of Dollars a week from the abusing countries on Tariffs that are already in place."

However, Wood challenges this narrative by citing “anecdotal evidence suggesting accelerating weakness” in key sectors. While headline retail sales may still appear stable, he argues they mask deeper issues, including the rising burden of consumer debt, weak business investment, and falling discretionary income among middle- and lower-income groups.

The report's analysis comes as Donald Trump approaches his 100th day in his current term, with a Reuters/Ipsos poll showing that his approval rating on economic management has fallen to just 37%. This decline in public confidence adds to the pressure on Trump, who has based much of his political messaging on a narrative of economic strength.

From a global markets perspective, Chris Wood’s recommendation to pivot away from the US and toward India, China, and Europe is significant. It reflects a growing consensus among strategists that the era of US market dominance is fading. India’s resilient growth, China’s rebound after COVID-related disruptions, and Europe’s monetary easing are seen as more favourable environments for investment in the current cycle.

Wood's long-standing view has been that the US equity market’s dominance is cyclical, not permanent. The peak of America’s share in the MSCI All Country World Index in December 2024 is cited as a historical inflection point, similar to Japan's dominance in 1989, which was followed by decades of underperformance.

In terms of financial strategy, Wood suggests that investors prepare for volatility and look beyond traditional safe havens. He expresses scepticism about the Federal Reserve's ability to stimulate the economy effectively, given that interest rates are already low, and consumer leverage is high. In this scenario, he believes that fiscal tools will be limited, and that market-based adjustments, including a fall in the dollar and a rotation in global capital flows, are more likely outcomes.

Another critical point raised in the note is the state of American consumer credit, which Wood sees as a canary in the coal mine. As more consumers struggle to repay loans, especially in credit card and auto segments, banks are beginning to tighten lending standards, which could further constrain consumption and weaken growth.

The report concludes on a cautionary note. While there may still be short-term optimism in certain data releases, the underlying fundamentals show growing cracks. For investors, the takeaway is clear: Don’t be lulled into complacency by short-term rallies in the US market. Instead, rebalance portfolios towards more promising regions, especially Asia and Europe, where valuations are more reasonable, and growth trends are healthier.

In summary, Chris Wood’s April 24 Greed and Fear report is a comprehensive warning on the state of the US economy, underlining how a mix of consumer debt, corporate earnings pressures, and poor trade strategy may be combining into a looming economic downturn. With financial markets at a crossroads, his guidance offers a strategic roadmap for those looking to navigate the uncertainties ahead by diversifying into more robust global markets.

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