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Highlights
- Market indices points to a likely overturn of the economy soon
- The Federal Reserve might protect any recession fallout with rate cut
- Investors are turning to assets to hedge against any potential fallout
The US recession scare is getting more intense, especially with the soaring stock market volatility. Economic data unleashed in the past few weeks have not helped the market resilience with most stocks taking series of beating over the last 30 days. While the odds are not in the favor of the economy, the question remains whether the Feds will step up to save the day.
Why is US Recession More Likely?
An earlier insight shared by market analyst Game of Trades revealed major trends that shows the economy might slip soon. First, he pointed out how the S&P 500 chart is at the verge of a major correction after about a year. This correction will come after sky-high stock market valuation that has seen top firms hit massive peaks.
Just like the stock market, the digital correction ecosystem might also record similar corrections moving on. While many projection higher highs for Bitcoin (BTC), the correlation with the stock market is a major factor to note. The potential stock and crypto market selloff is also complemented by the trends in the yield curve.
According to Game of Trades, this yield curve is showcasing a steep trend, one that speaks to a possible US recession. In addition to these, the Shiller PE Ratio is at its highest level after 150 years. The Shiller PE Ratio is a metric that shows whether the stock market is overvalued or undervalued. With stocks like NVIDIA soaring above $3 trillion recently, and MicroStrategy outperforming in growth terms, this ratio shows over-valued market.
One last major indicator that might force the Federal Reserve to step in is the VIX Chart. This chart shows a high volatility and might force an emergency interest rate cut soon.
Investors Can Plan Ahead
Recessions are not uncommon in most advanced economies. As the biggest financial market in the world, expert considers any US recession as a long due reset.
In order to escape this potential market fallout, expectations are on the Federal Reserve to act. However, some companies like MicroStrategy are betting big on viable hedges against fiat devaluation. While MicroStrategy has chosen Bitcoin as its preferred hedge, other investors prefers Gold.
Betting on BTC in the US is not made legal through spot Bitcoin ETF products. As a way to further advance the adoption, Morgan Stanley now allows its brokers to trade the product. Reportedly, a Wells Fargo Bitcoin ETF move is also in the works.
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