After last week’s “Black Thursday” and the second “Black Monday” in eight days, Wall Street rebounded some on Tuesday, March 17th, as the top U.S. stock indexes climbed upon the Trump administration carving out new domestic plans to combat the COVID-19 coronavirus pandemic.
The acute risk-on swing was positive for the top cryptocurrencies, bitcoin (BTC) and ether (ETH), which have seemed to trade in close correlation with mainstream index giants like the S&P 500, the Nasdaq, and the Dow Jones Industrial Average in recent days.
Each of those large indexes climbed by more than 5 percent on Tuesday, while BTC and ETH tracked up more than 8 percent intraday to $5,450 and $119 respectively. But markets are far from out of the woods yet, Goldman Sachs and Morgan Stanley economists separately said in new forecasts.
Down From Here?
A similar market bounce was seen last Tuesday, after which the markets turned uglier across the ensuing three days. Could we be in store for a similar trajectory this week?
The sentiment factor is slightly better now, to be sure, as the Trump admin floated new aggressive emergency stimulus plans and other COVID-19 maneuvers on March 17th. But those may prove to be short-term stopgaps at the start of a longer, wider economic slowdown — particularly if the pandemic considerably worsens, or even just if its current effects continue to be realized for the foreseeable future.
Notably, those who have come around to the idea that a global recession is already here include economists at major U.S. investment banks Goldman Sachs and Morgan Stanley.
At Goldman, a specialist team headed up by Jan Hatzius published a bulletin on Tuesday that forecasted growth of the global economy would shrink to 1.25% this year, not far from the tightening to 0.8% that was seen amid the last financial crisis in 2009.
In parallel, Goldman economists Hui Shan, Yu Song, and Andrew Tilton projected that China — the “World’s Factory” — would see its real GDP growth hit 3%, a considerable shortfall from their prior projection of 5.5%.
At Morgan Stanley, economist Chetan Ahya and others now slot a global recession as their “base case” projection for 2020 and see global economic growth grinding down to 0.9%, per a note also published on Tuesday.
Markets may turn more bullish toward the end of the year, both Goldman’s and Morgan Stanley’s specialists said, but things might get uglier yet.
Crypto Vulnerable, But Promise Remains
Like stocks, top cryptocurrencies like BTC and ETH trade currently trade like risk-on assets. In the de-risking environment like we’ve seen over the last week, their prices have taken big hits accordingly.
But these alternative monies, and their surrounding infrastructure, have plenty of promise not only when it comes to their continued technical progress but also in their ability to keep evolving in a monetary sense.
Consider the case of bitcoin. The cryptocurrency is unlike any mainstream asset in the world, and it has a clear trajectory to keep growing and starkly differentiating itself — and thus its value — from these traditional assets. Coinmetrics.io cofounder and Castle Island Ventures founding partner Nic Carter argued as much in a March 17th Twitter thread on the state of Bitcoin:
“As long as people continue to crave a permissionless, globally-available, freely usable, always-on, never impaired alternative monetary system, Bitcoin will continue to matter. Now more than ever.”
And that’s to say nothing of Ethereum’s rising decentralized finance, or DeFi, sector. It is still fledgling and in need of more maturing, of course, but it has incredible and obvious potential for the world stage in the years ahead. In the mean time, the focus shifts to weathering the volatility that may come with a deepening global recession.
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