In a stark reflection of growing economic anxiety, markets have faced significant sell-offs, particularly in crypto and technology stocks, as fears of a potential recession loom larger in the face of updated forecasts from leading economists.
On March 10, the Wall Street investment bank JPMorgan announced an increased recession risk for this year, now estimated at 40%, a notable rise from the previous 30% just a few months ago. This unsettling prediction has sparked a broader selloff, contributing to a decreasing trend in risk assets.
JPMorgan analysts expressed concerns over the potential for the U.S. economy to slip into a recession largely due to the extreme policies being implemented by the current administration. Similarly, Goldman Sachs has raised its 12-month recession probability from 15% to 20%, indicating that worsening economic data could prompt further adjustments to this forecast.
In the backdrop of these forecasts, Morgan Stanley has also adjusted its projections, now predicting a modest GDP growth of 1.5% for 2025 and an even slower rate of 1.2% for 2026 while simultaneously adjusting inflation expectations upward.
Despite the alarming predictions, not everyone shares the same viewpoint. Kevin Hassett, head of the National Economic Council, has made a case for optimism, describing numerous reasons to be bullish about the economy, albeit acknowledging some recent fluctuations in data.
As public sentiment sways, former President Donald Trump weighed in, characterizing the current economic climate as a “period of transition” and challenging the narrative of impending recession during his discussions with Fox News.
Market Reactions
The implications of these forecasts are clearly visible across financial markets. The S&P 500 now stands lower than its pre-election levels from November 5, 2024, having experienced losses of nearly 10% from its highs. The tech-heavy Nasdaq index has slid into correction territory, suffering a 14% decline over a three-week period.
On March 10, all major U.S. stock markets closed in the red, with the S&P 500 down 2.7% and the Nasdaq seeing its most significant drop since 2022 at 4%. Notably, the Dow Jones Industrial Average lost nearly 900 points, reflecting broader market apprehensions.
Prominent tech companies, often referred to as the “Magnificent 7,” have seen collective losses exceeding $750 billion in market capitalization in just one day. Highlights include a steep 15% decline for Tesla, marking it as the worst-performing stock in the S&P 500 year-to-date, along with substantial drops for other tech giants like AI leader Nvidia and established names such as Apple and Meta.
In tandem with the stock market struggles, cryptocurrency markets have also taken a hit, experiencing their lowest valuation since early November. Total market capitalization has plummeted 7.5% to $2.6 trillion on March 11, with approximately $240 billion leaving the space during this tumultuous period.
Bitcoin (BTC) also faltered significantly, breaking through previous support levels and dropping to $76,784 before achieving a minor recovery back to around $79,000 at the time of writing.
The current volatility raises essential questions about the future direction of both the stock and cryptocurrency markets, prompting investors to reconsider risk exposures amid shifting economic landscapes.
