HSBC Says a U.S. Recession Will Come Before Year End

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HSBC, a leading banking corporation, predicts an impending economic slump for the U.S. that will strike in the final quarter of this year. The bank’s mid-year outlook foresees a bleak scenario, with alarm bells ringing about possible recessions for several global economies.

Economies on Red Alert

HSBC’s projections suggest that these economic downturns are closely tied to fiscal and monetary policies that are misaligned with stock and bond market movements. Despite some segments of the economy demonstrating resilience, the overarching risk for a recession looms large.

HSBC’s Global Chief Strategist, Joseph Little, suggests that Europe is following the U.S. into uncertain economic territory, despite a slight delay. The broader macroeconomic trends are aligning ominously, pointing to substantial recession risks. Little notes the onset of a minor profit recession, accompanied by a steady rise in corporate defaults.

Interestingly, Little sees a potentially positive side effect to this impending economic crunch. As inflation rates moderate quickly, he predicts this will offer an opportunity for policymakers to implement rate cuts, aiding in economic recovery.

With stubborn inflation and a hawkish approach from central bankers, HSBC Asset Management anticipates that the U.S. Federal Reserve will reduce interest rates before 2023 wraps up. It further projects the European Central Bank and the Bank of England will mirror this move in 2024.

What Happens to Cryptos in a U.S. Recession?

If the U.S. economy does indeed descend into a recession, the impact on the cryptocurrency market could be significant. Cryptocurrencies, while viewed by some as a hedge against traditional economic instability, are also widely recognized as risky assets. 

Therefore, during a recession, investors might pull back from cryptocurrencies to limit their exposure to this perceived risk, especially given the market’s nascent recovery from the crypto winter of 2022. 

This could induce a sell-off, causing a dip in cryptocurrency values. However, it’s also possible that a recession could prompt investors to diversify their portfolios and invest more heavily in digital currencies, seeing them as potential safe havens against traditional market downturns.