Mark Zandi, the Chief Economist at Moody's Analytics, has issued a stark warning that the risk of a significant correction in global asset markets, which includes cryptocurrencies, has significantly increased. Zandi highlighted that despite recent price pullbacks, crypto assets, alongside gold and silver, remain vulnerable to further downside risks.
He pointed to several concerning economic indicators in the United States. Real Gross Domestic Product (GDP) growth is below its estimated potential of 2.5%, employment growth has stagnated with less than 200,000 jobs added last year, and the unemployment rate is gradually increasing. Furthermore, inflation remains persistent, with the Personal Consumption Expenditures (PCE) price index hovering around 3%, complicating the Federal Reserve's ability to cut interest rates.
Zandi identified additional market burdens, including uncertainties surrounding potential global tariffs and escalating military tensions with Iran, which could spur inflation and volatility. He also warned of risks in the Treasury market, where hedge funds engaging in leveraged arbitrage have filled the void left by the Fed and global investors. This situation, combined with a large US budget deficit and high borrowing needs, could trigger a sharp rise in interest rates.
"The market is currently overheated by speculation. In contrast, asset prices are falling sharply, shocking an already fragile economy," Zandi stated, urging investors to exercise caution. He noted that financial markets feel "increasingly fraught," with the threat of a meaningful selloff being highest for stocks and corporate bonds, but also extending to crypto, gold, and silver.
