Selected arguments for a deepening recession this year
The S&P 500 is struggling to attack the 4,200 level, and stocks are weighed down by concerns about a banking crisis.
Capital concentration.
The top five weighted stocks in the S&P 500 index have outperformed the indexes by more than 25% since the beginning of the year, while small and micro-cap stocks hit three-year relative lows, historically signaling trouble for the broad market.
Concentrated big-cap tech performance continues to support the S&P 500, but their underwhelming valuations suggest the tech rally is way over the top.
Meanwhile, small-cap and micro-cap stocks lag significantly behind the S&P 500, and their poor performance historically precedes market declines.
With both micro and small caps hitting new yearly relative lows, the market was in a bad spot, leading up to the 2007 global financial crisis, 2016 and 2018 declines, COVID, and the 2022 bear market.
Bond yield curve.
The Fed's decision to raise rates by 25 basis points and the signal of a possible pause are met with the fact that the bond yield curve steepened as short-term rates fell more than long-term rates. This predicts a recession - historically it has always occurred a few months after this incident.
The Fed chairman reiterated that inflation will need some time to calm down and if it doesn't, further hikes may be necessary. Still, bonds herald a Fed pause, which always preceded recession bottoms.
The question remains: how will cryptocurrencies, being a risky investment, react to the decline in stocks in the second half of 2023?
The S&P 500 is struggling to attack the 4,200 level, and stocks are weighed down by concerns about a banking crisis.
Capital concentration.
The top five weighted stocks in the S&P 500 index have outperformed the indexes by more than 25% since the beginning of the year, while small and micro-cap stocks hit three-year relative lows, historically signaling trouble for the broad market.
Concentrated big-cap tech performance continues to support the S&P 500, but their underwhelming valuations suggest the tech rally is way over the top.
Meanwhile, small-cap and micro-cap stocks lag significantly behind the S&P 500, and their poor performance historically precedes market declines.
With both micro and small caps hitting new yearly relative lows, the market was in a bad spot, leading up to the 2007 global financial crisis, 2016 and 2018 declines, COVID, and the 2022 bear market.
Bond yield curve.
The Fed's decision to raise rates by 25 basis points and the signal of a possible pause are met with the fact that the bond yield curve steepened as short-term rates fell more than long-term rates. This predicts a recession - historically it has always occurred a few months after this incident.
The Fed chairman reiterated that inflation will need some time to calm down and if it doesn't, further hikes may be necessary. Still, bonds herald a Fed pause, which always preceded recession bottoms.
The question remains: how will cryptocurrencies, being a risky investment, react to the decline in stocks in the second half of 2023?
13 users upvote it!
4 answers