- While the Fear and Greed Index rose by 10 points, analysts warn of an impending recession, evident in falling rates despite rising inflation.
- Since Trump’s trade war and the Fed’s rate cuts in September 2024, the S&P 500 shows a 2% decline, with history suggesting further drops typically follow rate pivots.
- Analysts expect further inflation increases in the coming months, while gold continues to be the preferred “safe haven”, unlike crypto assets.
- Investors are increasingly seeking diversification beyond USD exposure.
Bitcoin and other major cryptocurrencies are up in the past 24 hours, trying to push against a downtrend on the seven-day chart. This comes just hours before Donald Trump is expected to impose further tariffs on what he called ‘Liberation Day’.
Markets are anticipating that his tariffs are less severe than previously expected. Meanwhile, the Fear and Greed Index moved up by 10 points. While still in Fear territory, it has come closer to neutral, indicating sentiment may be recovering.
Related: Australian Financial Industry Labelled “Negligent” Over Crypto Ignorance
Despite Improved Sentiment, Recession Fears Still Real
Nevertheless, fear of a recession is still spreading. Analysts at The Kobeissi Letter wrote on Crypto Twitter that “equity markets are clearly pricing-in a recession”, amid falling rates and rising inflation.
The analysts explained that the onset of President Trump’s trade war coincided with the peak in 10-year note yields. And, over the past two months, “rates have fallen as markets priced in a recession”.
They added that the introduction of a 25% auto tariff led to another drop, marking a new lower high in yields.
Since the Fed began cutting rates in September 2024, recession concerns have led to a 2% drop in the S&P 500, with history showing further declines typically follow rate cuts during recessions, despite an average return of 1% six months post-pivot:
With consumer sentiment at its lowest since 2022, the analysts believe “inflation will rebound further in March and April and Sentiment will fall”.
Gold Safe Haven of Choice, Says Analyst
So, while what exactly Trump will say and do remains to be seen in a couple of hours, some analysts believe the market’s ‘risk appetite’ continues to decline.
ADM Investor Services International Chief Economist and Global Strategist, Marc Ostwald, said that “for the time being [reduced risk appetite] drives a wedge between crypto assets and gold, which continues to be the ‘safe haven’ of choice.”
Ostwald said that market participants are looking to diversify away from USD exposure, “which has long been a source of concern to them”.
Related: Stablecoin Giant Circle Files for IPO, Aiming for NYSE Listing Under ‘CRCL’
Trump is expected to announce his tariffs early Thursday morning local time in Australia.
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