US stock markets have taken a hit since Wall Street bankers and the central bank dismissed the specter of a recession. Furthermore, crypto markets are also backpedaling today but remain range-bound where they have been for months.
On Aug. 16 macroeconomics commentary provider The Kobeissi Letter reported that the S&P 500 has lost $850 billion in market capitalization. This is in just a fortnight since JP Morgan said they no longer expected a recession.
Wall Street Defies Recession Calls
“It has only been 10 days since JP Morgan announced their new view,” it said before adding, “Is this a coincidence?”
Earlier this month, JPMorgan became the latest bank on Wall Street to push out its recession forecast to 2024. The prediction followed Bank of America which also suggested that a recession may not happen until next year.
Goldman Sachs is another big bank that said there was just a 20% chance the US suffers a recession within the next 12 months.
Furthermore, Federal Reserve staff also forecast a “noticeable slowdown” rather than a recession the last time they hiked rates in late July.
“This nearly marked the exact high in the S&P 500 earlier this month,” said the Kobeissi Letter.
It commented that 14 banks are currently calling for a recession, but 6 banks are not, adding,
“The ‘soft landing’ camp has grown over the last few weeks.”
The S&P 500 Index (SPX), which tracks the stock performance of 500 of the largest US companies, hit a 2023 peak of 4,588 on July 31. Since then, it has declined by 3.3% to 4,437 on Aug. 15, closing below its 50-day moving average for the first time since March.
Furthermore, the tech-heavy Nasdaq 100 Index (NDX) has fallen 5% from its 2023 high in mid-July.
Renowned investors such as Michael Burry are also bearish. As reported by BeInCrypto, “The Big Short” analyst shorted the two US stock indexes in a massive trade this week.
On Aug 15, the Wells Fargo Investment Institute said the US economy is unlikely to avoid a potential recession. “Ultimately, we believe the economy will struggle to avoid a recession” as higher inflation and interest rates are expected to further mount pressures on the consumer, it said in a note.
Crypto Markets Decline
Crypto markets have followed suit this week and are in the red but remain within their long-term range-bound channel.
Total capitalization has shrunk by around $20 billion since the beginning of the week, falling to $1.20 trillion at the time of writing.
Bitcoin and Ethereum took a minor dip during the Wednesday morning Asian trading session but remain sideways.
Furthermore, altcoins are suffering heavier losses as red engulfs the crypto markets once again.
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