Large Banks Warn of Increasing Recession Risks

The financial market is signaling that the risk of recession is becoming increasingly tangible as uncertainties related to tariffs and signs of economic weakening spread across Wall Street. According to an analysis model from #JPMorgan Chase & Co., the probability of a recession priced by the market has risen from 17% at the end of November to 31% on March 5. Meanwhile, Goldman Sachs also raised its recession risk forecast from 14% to 23% since January.

Key economic indicators such as the 5-year Treasury yield and base metal prices suggest that the likelihood of a recession is even higher, reaching up to 50%. These are signs that economic risk is growing increasingly large, forcing investors and businesses to face significant uncertainty in the near future.

Tariffs and Declining Economic Confidence – Factors Driving Recession Risks Higher

Market volatility has become more tense as President Donald Trump reaffirms plans to adjust the global trade order, although he acknowledges that this may bring many difficulties. In particular, the new tariffs imposed on Canada, Mexico, and China since March 4 are eroding the confidence of businesses and consumers.

JPMorgan notes that economic data in the US is becoming less favorable, with manufacturing activity nearly stagnant, consumer confidence dropping to its lowest level since 2021, personal spending unexpectedly declining, and the housing market recording disappointing results. These are alarming signals for the world's largest economy.

Conflicting Forecasts, But Risks Cannot Be Ignored

Although the probability of a recession is not certain, large financial institutions acknowledge that risks are increasing. Mohamed A. El-Erian, president of Queens' College at Cambridge, has raised the recession risk forecast from 10% to 25-30% in just the first two months of 2025.

Data from JPMorgan shows that the prices of 5-year Treasury bonds, base metals, and small-cap stocks are currently pricing recession risks at 50%. However, the investment-grade credit market only reflects recession risks at 8%, still significantly higher than the nearly 0% level at the end of 2024.

Goldman Sachs' model, based on various cross-asset indicators, including credit spreads and the Cboe Volatility Index (VIX), is also reflecting an increasing level of concern. In particular, an index tracking expectations for #Fed interest rates over the next 12 months shows a recession probability of 46%, a figure that cannot be overlooked.

Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs, stated: "The biggest change comes from how the market prices the Fed's interest rate cuts and the yield curve, factors that often signal potential recession risks." Additionally, the VIX index is also showing signs of increase, a phenomenon that often occurs before or during a recession.

Will the Recession Scenario Resemble 2023?

Although the market is reflecting a higher risk of recession, it is important to note that economic forecasts from the market were often inaccurate in 2023. At that time, many were concerned that the Fed's tightening monetary policy would push the US economy into recession, but ultimately, consumer spending remained strong, and the economy did not fall into crisis.

This time, the context is somewhat different: inflation is still high, economic growth is showing signs of slowing down, but the labor market remains stable with an unemployment rate below 4%. Additionally, a large part of the negative data comes from surveys rather than actual figures, leading many experts to argue that it is too early to conclude that a recession is imminent.

Cayla Seder, a macro strategist at State Street Global Markets, believes: "It would be too early to conclude that US economic growth is completely declining. However, the growth momentum is becoming more concentrated, meaning the US economy has less growth momentum."

Impact on the Cryptocurrency Market – Opportunity or Risk?

In the context of increasing recession risks, the USD has weakened significantly. The USDX has dropped from 107.4 to 104.3 since the beginning of March, according to data from #FXCE . This could provide opportunities for Bitcoin and the crypto market, as history shows that when the USD weakens, capital tends to flow into non-traditional assets like gold and cryptocurrencies.

On the other hand, if the US economy does indeed enter a recession, this could trigger a wave of sell-offs in the financial markets in general, including crypto. Institutional investors may withdraw capital from risky assets like $BTC in search of safety, similar to what happened in early 2020 when the pandemic broke out.

However, another scenario may occur: If the Fed is forced to cut interest rates faster to support the economy, this could help the crypto market recover strongly. Bitcoin and digital assets may benefit from loose monetary policy, similar to how they reacted after previous rate cuts.

Conclusion: Cautious but Not Panicked

The risk of recession in the US is increasing, and the financial markets are reflecting that. However, this does not mean a crisis will occur immediately. Investors need to closely monitor key economic indicators and moves from the Federal Reserve (Fed) to make informed decisions.

For the crypto market, a weaker USD could be a positive signal, but if a recession does occur, selling pressure may emerge before the market finds a balance. Therefore, investors should manage risk closely, diversify their portfolios, and closely monitor macroeconomic developments in the coming time.