Moody’s chief economist Mark Zandi said the risk of a correction in global asset markets, including cryptocurrencies, had increased significantly. According to Zandi, despite recent price declines, crypto assets, gold and silver remain vulnerable to downside risks.
Zandi highlighted the slowdown in the US economy, saying real gross domestic product (GDP) growth remained below its potential level of 2.5 percent, employment growth was stagnating and the unemployment rate was gradually increasing.
He also pointed out that the Personal Consumption Expenditures (PCE) price index, one of the inflation indicators closely monitored by the US Federal Reserve (Fed), continues to hover around 3 percent.
Additionally, Zandi said uncertainties over tariffs and Iran-related military tensions were putting additional strain on markets, and warned that financial conditions could tighten further.
Zandi said hedge funds engaged in leveraged arbitrage trading have filled the void created by the withdrawal of the Fed and global investors from the U.S. Treasury bond market, and that this, combined with a large budget deficit and high borrowing needs, could lead to a sharp rise in interest rates.
“The market is currently overheated by speculation. On the other hand, asset prices are falling sharply, shocking an already fragile economy,” Zandi said, urging investors to exercise caution.
*This does not constitute investment advice.