Plunging US chemical stock prices may already be signaling a recession by year-end 2025, according to analysts. Hassan Ahmed, an analyst at Alembic Global Advisors, noted that chemical equities have historically been a reliable lead indicator for recessionary periods. He stated that chemical equities typically start discounting a recession four to six quarters before it occurs, suggesting that the current downturn in the sector could be pointing to a recession by the end of 2025.
US chemical equities began to decline significantly in mid-2024, with the selling intensifying in October 2024 and continuing into April 2025. Ahmed highlighted that the average Western chemical equity has dropped 22% year-to-date and is down 54% from its 2022 highs. This decline far exceeds the average 31% drop, peak-to-trough, observed across all US recessionary periods since the 1960s.
Despite the steep decline, Ahmed suggested that the downturn might be overdone. He explained that chemical equities, as leading indicators, tend to fall sharply ahead of a recession, outperform the market during the recession in anticipation of an upturn, and rally strongly, averaging an 83% increase, coming out of a recession.
Kevin Swift, former chief economist of the American Chemistry Council (ACC) and current ICIS senior economist for Global Chemicals, has also analyzed the US chemical industry as a leading indicator for the US business cycle. Swift allocated around a 10% weighting to US chemical stock performance in the ACC Chemical Activity Barometer (CAB). He currently estimates the probability of a US recession in the next 12 months at 34% .
The significant decline in chemical equities, coupled with their historical role as a leading economic indicator, raises concerns about the broader economic outlook. Investors and policymakers will be closely monitoring these trends as they assess the potential for a recession by the end of 2025.
US chemical stocks may already be signaling recession – analyst.
