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JPMorgan: US Recession by 2020 Has 60% Chance, is Crypto an Alternative?

Last Updated March 4, 2021 3:50 PM
Joseph Young
Last Updated March 4, 2021 3:50 PM

$362 billion banking giant JPMorgan Chase has predicted a 60 percent chance for the next US recession to occur by 2020. In a global market crash, can crypto be a viable alternative to existing stores of value?

“The probability of a U.S. recession within one year is almost 28 percent, and rises to more than 60 percent over the next two years, researchers wrote in a note this week. Over the next three years, the odds are higher than 80 percent, according to the note,” Bloomberg reported .

Why Experts Predict a Market Crash

According to the Federal Reserve Bank of New York, there exists a mere 14.5 percent chance of a recession occurring by the end of 2019, which is a stark difference from that of JPMorgan’s 60 percent chance by 2020.

The difference comes from the intricate model of JPMorgan that tracks virtually every indicator that could contribute to the global economy. Some of the indicators include compensation growth, consumer and business sentiment, and labor participation.

Stephen Stanley, chief economist at Amherst Pierpont, suggested that 2020 could be considered as a premature period for the next US recession to occur but he echoed a similar sentiment to JPMorgan in that while the US economy remains strong with low unemployment rate and a bull market, the risk of a recession in the years to come exists.

Generally, the majority of economists in the US forecast a recession to occur in the next two to three years. David Altig, Federal Reserve Bank of Atlanta research director and NABE’s survey chair, disclosed that two thirds of business economists in the US expect the market to crash by the end of 2020, mostly due to trade issues.

“Trade issues are clearly influencing panelists’ views,” Altig said, stating that trade issues and high interest rates imposed by the Fed leave US markets vulnerable to a mid-term crash.

Is Crypto an Alternative?

During a period in which many economists forecast a market crash and a major recession in the next two years, the demand for crypto has increased rapidly.

While not portrayed by the prices of major cryptocurrencies, financial institutions such as Fidelity, Goldman Sachs, and Citigroup have established infrastructure to target institutional investors planning to invest in the digital asset market.

Banks and investment firms have prevented from establishing businesses in the cryptocurrency sector due to the lack of regulatory certainty in the market. Experts have stated that the abruptly emerging trend of major financial institutions entering the crypto market suggests the demand for crypto from investors in the traditional finance sector has increased rapidly in the past several months.

As Jim Hamel, portfolio manager at Artisan Global Opportunities Fund explained , the digital payments industry has experienced exponential growth in recent years, which could naturally lead investors to cryptocurrencies.

“There are a number of tailwinds contributing to this trend. First, we’re seeing rapid growth in e-commerce, which requires that customers be able to make secure digital payments. The growth in cross-border transactions and the general impact of an increasingly globalized marketplace are helping accelerate this trend.”

Featured image from Shutterstock.