In recent months, there has been much speculation about the possibility of a recession hitting the United States, as a number of indicators are showing negative trends. Macro-economist Henrik Zeberg has recently warned that the US economy could be on the brink of one of the worst recessions in history. In a post on June 6, Zeberg pointed out that this recession could follow a period of positive momentum in both the stock market and the crypto sector.
Zeberg predicted a significant crash in two-year Treasury yields, which could signal a recession comparable to the Great Depression of 1929. He shared a chart comparing two-year Treasury yields with the Federal Funds Rate, indicating historical patterns where changes in market yields preceded actions by the Federal Reserve. The chart also highlighted spikes before major economic downturns, with inflation currently standing at 3.4%, reminiscent of past troubling levels. The Relative Strength Index (RSI) was also examined in the chart, showing that large bearish structures in the RSI often precede market crashes. The current “Mega Bearish Structure” in the RSI suggests a similar impending decline.
According to Zeberg, a crash in two-year yields is imminent, along with clear recession signals. The decline in Treasury yields typically reflects increased demand for safe-haven assets as economic uncertainty grows, leading to rising bond prices. This trend is often driven by concerns of a market downturn or economic recession.
As projections point towards a potential blow-off top in US equities and cryptocurrencies, there is a possibility of a final surge in asset prices before a sudden decline. Large-cap companies have been leading the recent market rally, particularly the S&P 500 index, while the cryptocurrency market is currently in a consolidation phase with Bitcoin attempting to break the $70,000 resistance mark.
The Great Depression of 1929 remains the most severe economic downturn in modern history, characterized by widespread unemployment, deflation, and significant declines in industrial output. With numerous red flags being raised, there are lingering questions about when a possible recession may occur. According to Game of Trades, a platform for investment research, based on the 10-year/3-month US Treasury curve, a recession is likely to hit in the latter half of 2024.
