The U.S. Federal Reserve is gearing up to cut interest rates, and this could be good news for Bitcoin—if we can avoid a recession. While the U.S. job market has shown some signs of cooling lately, Torsten Slok, Chief Economist at Apollo Research, believes there’s no need to hit the panic button just yet.
Recession Risk on the Decline
Slok points to data from Bloomberg, which puts the chance of a recession in the U.S. and Europe at around 30%. So, while there’s still a possibility of a downturn, it’s not particularly high. The U.S. economy is still growing at a decent pace, and although the job market is softening, it hasn’t reached a point that would justify major recession fears.
Some people see the normalizing yield curve as a signal that a recession is on the way. Historically, this has often been true because the yield curve tends to flatten when central banks start cutting rates. However, as Slok points out, just because the yield curve normalizes doesn’t mean a recession is inevitable. It’s like assuming that because firefighters are always at fires, they must be the cause. Instead, it’s essential to look at the broader data.
What the Numbers Are Saying
Slok feels confident in a “soft landing,” where inflation comes down to 2.0% without triggering a recession. His optimism stems from positive incoming data, which shows several encouraging trends:
- Unemployment fell in August, and job growth remains steady according to both the establishment and household surveys.
- Wage growth picked up to 3.8% in August, staying well above pre-pandemic levels.
- Consumer spending in the U.S. has been rising recently, with more money flowing into clothing, dining, sports goods, vehicles, and auto parts.
- Retail sales data saw an uptick last week and continue to show strength.
- Initial jobless claims (new unemployment applications) have been dropping for several weeks.
- Continuing claims (those unable to find work) are also on the decline.
- The number of bankruptcies is decreasing.
- Economic growth projections from respected models remain solid, pointing to a growth rate of 2.1% to 2.4%.
- Future earnings forecasts for S&P 500 companies are at all-time highs.
“The bottom line is that the U.S. economy is not in a recession, and there are no signs of a recession on the horizon,” Slok concludes. That’s pretty straightforward.
What This Means for Bitcoin
If Slok is right, this could be a boost for Bitcoin. A recession and a bull market usually don’t go well together, so if you’re hoping for another leg up in this Bitcoin bull market, you’ll want to see Slok’s predictions play out.
Follow us at HowToBuyBitcoin.org for the latest news and updates, and keep an eye on the economic signals mentioned, as they could set the stage for what’s next in the Bitcoin market.