Investors Run to Safety as JPMorgan Increases U.S. Recession Risk to 40%
Investors rapidly retreated from risky assets this week as JPMorgan raised U.S. recession odds to 40%. Following this, the S&P 500 plunged 2.7%, hitting September lows. Similarly, the Nasdaq nosedived 4%, marking its worst day since 2022, while the Dow Jones shed 900 points. Tech stocks and cryptocurrencies led the sell-off, reflecting heightened economic anxiety despite White House assurances.
Morgan Stanley slashed 2025 GDP growth forecasts to 1.5%, citing inflation concerns. Goldman Sachs also elevated its 12-month recession probability to 20%, warning of risks if policies remain rigid.
Economic Concerns
JPMorgan analysts flagged “extreme U.S. policies” as a catalyst for potential recession, revising odds upward from 30%. Concurrently, Goldman Sachs echoed caution, linking its updated forecast to potential policy stubbornness. Both warnings triggered a flight to safer assets like bonds and gold.
In contrast, Kevin Hassett, a top Trump economic adviser, dismissed recession talks on CNBC, citing “reasons to be bullish.” Nonetheless, markets remained unconvinced, with Polymarket dubbing recession odds “the best-looking chart in finance.”
Tech Giants and Cryptocurrencies Face Massive Sell-Offs
The “Magnificent Seven” tech firms lost $750 billion in market cap on March 10. Tesla plummeted 15%, while Apple, Meta, and Nvidia each dropped over 4%. Simultaneously, crypto markets crumbled, shedding 7.5% ($240 billion) in 24 hours. Bitcoin briefly tumbled to $76,784 before stabilising near $79,000.
The S&P 500 now sits below pre-election levels, erasing the “Trump bump.” Analysts attribute the sell-off to recession fears and overheated valuations.
White House Officials Dispute Recession Predictions
The White House pushed back vigorously, with Hassett highlighting “blips in the data” rather than systemic issues. Similarly, Trump called the downturn a “period of transition” during a Fox News interview. However, Morgan Stanley’s inflation revisions and growth cuts overshadowed these statements.
Retail investors flooded social media with debates over crypto’s resilience. Yet, institutional players reportedly trimmed exposure, exacerbating volatility.
Crypto’s Dilemma: Risk Asset or Digital Safe Haven?
Cryptocurrencies face conflicting narratives. Short-term, they mirror tech stock declines, pressured by risk aversion. However, proponents argue Bitcoin could act as a hedge if central banks devalue fiat currencies.
Historically, crypto rebounded post-2020 crash amid stimulus measures. Yet, its lack of recession-era track record fuels uncertainty. Regulatory risks also loom, as lawmakers may tighten rules during downturns.
What lies ahead for crypto?
Analysts urge caution, predicting prolonged volatility. “Crypto’s correlation with stocks may deepen sell-offs,” warned Bloomberg’s Mike McGlone. Conversely, CoinShare’s James Butterfill noted Bitcoin’s “institutional adoption could buffer long-term declines.”
Investors now eye Federal Reserve policies and ETF inflows for signals. Should recession fears ease, bargain hunters might revive crypto markets. Until then, the flight to safety dominates.
Conclusion
With JPMorgan’s stark warning reverberating, crypto’s short-term outlook remains bearish. Yet, its decentralised framework and hedge potential offer glimmers of hope. As markets digest mixed signals, agility and diversified portfolios will be critical for investors navigating this high-stakes landscape.
