On Tuesday, all four major U.S. benchmarks fell as real estate data showed home sales fell 0.7% last month and Russian President Vladimir Putin suspended the nuclear arms control agreement with the United States. In addition, the US equity strategist at Morgan Stanley said the stock market is in a “dead zone” and could fall another 26%.
Investor fears of a prolonged recession are rising, US tensions with Russia are further disrupting global markets
On Tuesday, markets traded lower compared to the previous day as investors have been rattled by the current macroeconomic backdrop. The National Association of Realtors (NAR) published a report on Tuesday showing that the US real estate market is weakening, with home sales falling 0.7% in January. The price of gold and silver as well as the crypto economy fell, with the latter falling 1.37% in the last 24 hours, down to $1.11 trillion. Shares followed the same pattern, with all four major stock indices (DJI, GSPC, IXIC, RUT) falling 1.9% to 2.79% lower.
The NAR report, combined with continued high inflation, has investors worried that the US Federal Reserve will continue to raise interest rates, and some believe it could crush the US economy. Moreover, the tension between the United States and Russia increased significantly on Tuesday, and many believe that we are on the verge of one third World war. Russian President Vladimir Putin suspended the New START nuclear deal and put missiles on combat alert.
Putin said the West helped establish a “heinous method of deception” as the United States and other nations became involved in Syria, Libya and Iraq. “Russia suspends its participation in the New START agreement,” Putin stressed during the national event. The nuclear agreement, signed by former presidents Dmitry Medvedev and Barack Obama in 2010, was intended to prevent nuclear testing and war. Putin’s speech is not going down well with global investors, as the conflict between Ukraine and Russia has dampened the global economy.
Morgan Stanley strategist warns of ‘dead zone’ for the US stock market
Furthermore, the Morgan Stanley strategists do not believe that the US central bank and chairman Jerome Powell will fluctuate this year. The American stock strategist at Morgan Stanley, Michael Wilson, has warned that the stock market is now in the “dead zone”. Wilson detailed that the name “death zone” is a common term in mountaineering, where people climbing to extremely high altitudes lose oxygen. Wilson believes the stock markets are in a similar dead zone, and he predicts that the S&P 500 ( GSPC ) could drop 3,000 points in a quick period.
“Many deaths in high-altitude mountaineering have been caused by the death zone, either directly through the loss of vital functions, or indirectly by poor decisions made under stress or physical impairment leading to accidents,” Wilson explained in his note to investors. “This is a perfect analogy for where equity investors are today, and quite frankly where they have been many times over the past decade.”
Between the economy’s rising inflation, the American real estate slump, and rising tensions with other nations, the problems in the United States continue to mount. The headwinds from the Fed’s higher interest rates and the daily rising cost of living for average Americans have slowed the nation’s growth, and many suspect a long recession is on the way. Furthermore, a recent study shows that 55% of Americans think they will lose everything if a recession hits the US. A majority of respondents in the study (three out of four) suspect that a recession will occur this year.
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What do you think about the current state of the stock market and the growing economic concerns in the US? Do you agree with the Morgan Stanley strategist’s ‘dead zone’ warning, or do you have a more optimistic view of the future of the US economy? Share your thoughts in the comments section below.
Jamie Redman
Jamie Redman is the news editor at Bitcoin.com News and a financial technology journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about the disruptive protocols emerging today.
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