Investor concerns over Donald Trump’s tariffs triggered a sell-off of US government debt, sharply increasing interest rates on US bonds from 3.9% to 4.5%. This undermines the traditional “safe haven” status of US bonds, increasing borrowing costs for both companies and the government. The escalating trade war between the US and China, coupled with fears of higher inflation and reduced economic growth, fueled the sell-off, leading to predictions of a potential US recession. The Federal Reserve may be forced to intervene to stabilize the bond market, while the global economic impact, particularly on the UK, is already being felt.
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JPMorgan Chase has raised its global recession probability to 60%, citing the Trump administration’s new tariffs as a major contributing factor. This significant increase stems from a reassessment of U.S. trade policy, now deemed considerably less business-friendly than previously anticipated. The bank highlights the tariffs’ substantial impact, equating to the largest tax increase since 1968 and potentially exacerbating economic hardship through retaliatory measures and decreased business confidence. JPMorgan projects that the full implementation of these policies could trigger a U.S., and potentially global, recession in 2019.
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Goldman Sachs’ recent upward revision of the US recession probability to 35%, from a previous estimate of 20%, is a significant development that deserves careful consideration. This increase reflects a growing concern among economists about the trajectory of the US economy. The jump alone suggests a rapidly evolving situation, prompting a reassessment of economic forecasts.
The increased probability underscores the accumulating economic headwinds. These include factors such as persistent inflation, rising interest rates, and a weakening consumer confidence. The current economic climate is reminiscent of past periods that preceded significant economic downturns, raising anxieties among investors and the public.
Many observers believe that the 35% figure itself may be an underestimation of the actual risk.… Continue reading
I woke up this morning to a barrage of news alerts about Japan’s stock market taking a colossal plunge of 4,451 points, surpassing the infamous Black Monday crash of 1987. The Nikkei Stock Average recorded its worst-ever daily sell-off, closing down 12.4% at 31,458.42. Panic selling ensued, triggered by fears of a looming U.S. recession and the yen’s unexpected surge in strength. As a resident in Japan, it’s concerning to witness such a drastic decline, especially when compared to historical events like Black Monday.
The recent market turmoil has been exacerbated by Japan’s Bank of Japan raising interest rates to 0.25%, a move that caught many investors off guard.… Continue reading
John Q. Hosedrinker 
Matt Underwood