According to Bloomberg, the giant investment bank JPMorgan has aligned itself with the increasing number of experts who predict a recession-free future for the US economy, retracting its previous recession expectation for the country. The bank’s chief economist, Michael Feroli, announced on August 4th that JPMorgan no longer expects a recession this year, as evidenced by its forecast of strong economic growth resulting from robust monetary expansion.
JPMorgan’s Statement Hits S&P 500
The US investment bank JPMorgan made a significant leap by quickly raising its annual real GDP growth forecast for the ongoing quarter from 0.5% to 2.5%, reflecting the strong growth pace of the economy. The bank’s chief economist, Michael Feroli, highlighted this change in expectations in a research note published on the same day. Feroli also expects modest growth below average in the US economy. This transformation in expectations is attributed to promising gains in productivity, heralding healthy growth prospects without inflationary pressures.
JPMorgan’s important announcement caused a major reaction in the markets, with the S&P 500 index plummeting by 50 points, resulting in a surprising $400 billion drop in market value within minutes.
Atlanta Fed President Raphael Bostic emphasized the significance of the recent slowdown in inflation during an event. Bostic warned about the potential effects of excessive interest rate hikes, stating that economic growth could unintentionally come to a halt.
This change in economic sensitivity is confirmed by the July US employment report, which fell short of the expected increase of 200,000 with a gain of 187,000 jobs in the Dow Jones. However, the unemployment rate in the US remained relatively stable at 3.5%, below expectations. Average hourly earnings provided a ray of hope for the labor market.
While positive indicators emerge, the revisions in previous forecasts and the initially weaker momentum of the labor market are considered noteworthy. The non-farm payroll expectations for May and June were downwardly revised by 25,000 and 24,000, respectively. Amidst these developments, both Bank of America and the Fed signaled a potential change in the overall sentiment by revising their economic outlook. Feroli added that despite the change in tone, negative outcome risks persist.
Statement Triggers Decline in Cryptocurrencies
Following JPMorgan’s withdrawal of recession expectations, the price of Bitcoin (BTC) experienced a 0.43% decline, while Ethereum’s (ETH) price dropped by 0.12%, managing to stay above key support levels. Altcoins like Litecoin (LTC) and Ripple (XRP) experienced minor declines. Surprisingly, there were notable increases in altcoins such as Shiba Inu (SHIB) and Curve DAO (CRV).
While global markets reacted relatively negatively to JPMorgan’s backtrack, the cryptocurrency market continues to be the focal point. As risk appetite returns, the possibility of sensitivity and price recovery becomes prominent.
