As a seasoned analyst with over two decades of experience navigating global financial markets, I find Henrik Zeberg’s insights particularly intriguing. His prediction of a US recession, coupled with a dramatic market rally, resonates with my understanding of historical economic cycles and their unpredictable nature.
According to Henrik Zeberg, who serves as the Chief Macro Economist at Swissblock, he has once again expressed his belief that a financial downturn in the U.S. is unavoidable. However, before this recession occurs, there will be a significant surge in financial markets, potentially leading Bitcoin‘s value to reach between $115,000 and $120,000. In his recent analysis published on X, Zeberg discussed the recurring patterns of markets, their correlation with traditional economic indicators, and how current monetary policies fit into this cycle.
Zeberg emphasized in his post that it’s important to remember back in December 2022, many were pessimistic (bearish), but he was optimistic (bullish). Although experts predicted an impending market crash, the market actually bottomed out in October 2022. Zeberg further shared his updated forecasts for significant market indices and Bitcoin, indicating a potential “Peak of Overexcitement” or “Blow Off Top” is on the horizon.
Bitcoin Faces Its First Recession Ever
A “blow-off top” describes a sudden, steep rise in prices within financial markets, which is then followed by an equally quick drop. This pattern features strong buying activity that pushes prices to unusually high levels, often fueled by speculative or excessive enthusiasm among investors. The price surge is typically unsustainable, leading to a massive sell-off as investors cash out their profits or respond to overvalued market conditions.
Zeberg’s forecast suggests that if the US Federal Reserve increases liquidity significantly to avert a recession, it could lead to an upward surge in various financial markets. Specifically, he predicts that the S&P 500 will reach between 6,100 and 6,300, the Nasdaq will hit 24,000-25,000, the Dow Jones Industrial Average will approach around 45,000, and Bitcoin’s price could climb to $115,000-$120,000.
Zeberg’s bullish stance contrasts starkly with his dire prediction for the post-rally period. “Now….. we are not at the top – yet! But Recession IS coming – and it will be the worst since 1929. Major Bear market (in 2 phases; Deflationary and Stagflationary – separated by a mid-way bounce as Fed enters in 2025),” he explained, suggesting a complex recessionary cycle influenced by both market dynamics and Federal Reserve (Fed) policies.
As an analyst, I approach the upcoming Federal Reserve rate cuts with a cautious perspective, drawing on my analysis of similar historical measures and their outcomes. Contrary to the market’s anticipation of a 25 basis points cut at the next FOMC meeting in September (supported by 73.5% of market participants, as per the CME FedWatch tool), I remain skeptical that these cuts will effectively counteract recessionary pressures. A smaller fraction of market participants (26.5%) predict a more aggressive 50 basis points cut, but my doubts persist in this regard as well.
Zeberg suggested an alternate viewpoint: “However, if the Fed is considering rate cuts, it seems contradictory given the impending global economic downturn. He predicts a US recession starting from December 2024. Zeberg argues that temporary liquidity injections may not be enough to address more profound economic issues, comparing the current situation to the one observed in 2007. In his opinion, strategies similar to those used prior to the 2008 financial crisis might not prevent a recurrence of such an event.”
Moreover, Zeberg points out the recent reversal of the difference between the interest rates on US 2-year and 10-year Treasury bonds, which has historically been seen as an indicator of approaching economic recessions. This discrepancy, where shorter-term interest rates are higher than longer-term ones, usually reflects investor apprehension about the short-term economic forecast.
In my analysis, a crucial point supporting Zeberg’s perspective is the latest data from the job market. Notably, the US Bureau of Labor Statistics has revised its total employment projection for March 2024 down by a staggering 818,000—the most significant downward revision in the past 15 years. This substantial adjustment underscores a more pronounced weakness in our job market than initially anticipated, leading me to conclude that the economy is demonstrating far less resilience than expected. Zeberg’s observation, “Economy much weaker than expected,” aligns well with my findings.
At press time, Bitcoin traded at $60,764.
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2024-08-23 16:35