Recent comments from economist Peterson raise questions about the current state of the economy and the measures the Federal Reserve (Fed) can take to stabilize it.
Decline of the Leading Economic Index
Peterson pointed to the Leading Economic Index (LEI), which has historically fallen by 5% or more ahead of every recession in the past 50 years. Despite a similar decline between 2022 and 2025, the Fed has yet to cut rates, an anomaly he believes signals the economy is already in recession even if the National Bureau of Economic Research (NBER) hasn’t officially declared one.
Roots of Inflation: Supply Chain Disruptions
According to Peterson, the roots of inflation lie in supply chain disruptions, not demand. He cited the fallout from Russia’s 2022 invasion of Ukraine, which created long-lasting shocks to energy, food, and critical minerals. “As long as interest rates remain high, growth will slow further, unemployment will rise, and consumption will be suppressed,” he said. He added that the Fed’s tools are ineffective against supply-driven inflation, while consumers remain burdened with debt, stagnant incomes, and persistent food price pressures.
Weakness of the Stock Market
Peterson also questioned the resilience of equities, noting that most of the S&P 500’s gains are concentrated in a few large tech stocks. This, he argued, shows that the rally is not broad-based and could falter if macroeconomic headwinds intensify.
Peterson's comments underscore current concerns about the state of the economy and highlight actions that he believes are necessary to protect investors in unstable conditions.
