A leading economist has issued a critical warning regarding the instability of major financial assets, including stocks, gold, silver, and the cryptocurrency market. This alert comes as these assets have exhibited increased volatility in recent weeks, with Bitcoin (BTC) and a majority of altcoins currently experiencing a technical bear market.
American stock indices have also shown signs of wavering, with the S&P 500 Index struggling to reach its all-time high, remaining stagnant throughout the year. Similarly, the Dow Jones and Nasdaq 100 indices have traded within narrow ranges recently, and precious metals like gold and silver have retreated from their peak values.
Mark Zandi, the chief economist at Moody”s, expressed concerns over the precarious state of the financial market, suggesting that a sharp decline could be on the horizon. He noted the prevailing complacency among investors who are treating market dips as buying opportunities. Furthermore, Zandi highlighted a growing trend of speculation, where many investors anticipate price rallies based on historical performance.
Identifying additional risks, Zandi pointed out that the U.S. economy is currently underperforming, with real GDP growth just above 2%, falling short of its estimated potential of around 2.5%. The labor market has shown little improvement, as the unemployment rate remains above 2%, and last year saw the smallest job growth in years, with fewer than 200,000 jobs added.
Concerns extend to the Treasury market, where long-term bond yields have been on the rise in recent months. The increasing leverage employed by hedge funds adds another layer of risk, especially as U.S. public debt continues to escalate. Zandi believes that the stock market has become significantly overvalued and is increasingly detached from economic realities.
Two major risks persist that could further impact stock and cryptocurrency prices. Firstly, former President Donald Trump has signaled the possibility of military action against Iran, which could escalate tensions in the region. Trump mentioned considering a limited strike to bring Iran to negotiations, while Iran has cautioned that any attack would lead to broader conflict. Such geopolitical instability could amplify volatility in both stock and crypto markets, potentially driving inflation higher in the U.S.
Moreover, a high inflation rate would complicate the Federal Reserve”s ability to lower interest rates. The second risk involves trade tensions stemming from Trump”s recent Supreme Court loss, prompting him to propose a global tariff of 15% using an executive power that allows him to impose tariffs for 150 days.
In summary, the combined pressures from economic underperformance, geopolitical risks, and market speculation may create a challenging environment for investors across various asset classes, including cryptocurrencies.
