Goldman Sachs, the global investment giant, has tempered its recession fears for the United States (US). The firm’s economists, led by Jan Hatzius, have slashed the probability of a US recession within the next year to 20% from a previous estimate of 25%. This downward revision is primarily attributed to recent encouraging economic indicators such as robust retail sales and a decline in unemployment claims.
The news sent ripples through financial markets, with US stocks experiencing a significant surge in the past week. However, while the prospect of a recession appears to be diminishing, experts remain divided on the overall economic outlook.
Bitcoin, as a risk-on asset, could potentially benefit from a decreased recession risk. IG Markets analyst Tony Sycamore suggests that Goldman’s probability cut is unlikely to trigger a major risk-on rally across asset classes, including cryptocurrencies. On the other hand, Markus Thielen from 10x Research highlights the potential for a short-lived Bitcoin rally following a rate cut, similar to the 20% surge observed in July 2019. However, he cautions that subsequent rate cuts in that year coincided with a 35% decline in Bitcoin’s value.
Also Read: Goldman Sachs Bets Big on Bitcoin: $418 Million ETF Stake Signals Institutional Adoption
While Goldman Sachs is optimistic, other financial institutions maintain a more cautious stance. JP Morgan’s chief global economist, Bruce Kasman, points to signs of weakening labor demand and a slowdown in global manufacturing. Despite these concerns, he acknowledges the resilience of the service sector.
The question of whether the US economy is on a path to a soft landing or a more protracted slowdown remains unanswered. The upcoming August jobs report will be crucial in determining the Federal Reserve’s monetary policy trajectory and, consequently, the overall economic outlook. With so many variables at play, investors and traders would be wise to exercise caution and monitor economic indicators closely.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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