A Possible Reversal from Edge of Recession

Do you believe that the economy is in such overblown form that a bubble is going to burst?

Investors estimate that the economy will enter a recession with a 50% likelihood based on the economy’s previous exponential expansion and contraction tendencies. It appears to have taken a long time to complete, but has recently been accelerated by high inflation and extremely high rising oil prices as a result of the Russian War, both of which have sped up the process.

Many would expect and hope that the Biden’s Administration announcement of releasing the oil reserve might provide a parabolic reverse to totally bring down oil prices as it offer a possible reversal from edge of recession ,but from an analyst’s point of view, their clear intent was to sell oil to the Europeans at high prices. The main reason was to cut off the Pipeline Stream 2 and jack up oil prices. The government is never committed to increasing production claiming Opec’s objection. Therefore, their objective might help the European countries in the short term while depleting the oil reserve at a possible higher risk of sabotaging by possible enemies. If an unforeseen emergency requirement does happen, the whole situation will crash and sink America into the slump of hyperinflation or even a total economic collapse.

Cryptocurrency values have been lucky in that they have fluctuated widely over the last two weeks. During the first three months of 2022, Bitcoin in particular fell from a high of over 60, 000 to a low of 38, 000 to 43, 000, due to uncertainty surrounding the Federal Reserve’s decision to implement the new interest rates until just three weeks ago, when the Fed authorities finally did so in response to the new interest hike.

While the impending dip is predicted to be slight, its magnitude is unknown.

The Wall Street financial establishment feels that a cause for hyperinflation is improbable, but if the war drags on for more than 6 to 8 months, the whole scenario will change drastically. In today’s environment, it appears as though the media is uninterested in a downturn, much less a catastrophic collapse. This lack of concern may be harmful, but it is likely that the media is completely focused on the Russian-Ukrainian confrontation.

Banking institutions that hold considerable amounts of government debt and consumer loans are projected to become seriously under capitalized if the next recession places a significant fiscal burden on both the public and private sectors.

Although it appears as though a recession is imminent, it appears as though not many are paying any attention to possible realization as the magnitude of the war exceeds far beyond any confrontation before, even more horrid than the last Iraq war.

According to the International Monetary Fund, a country’s stock market health is the most dependable indicator of its economic health. A company’s stock price will increase or decrease in response to expectations about future profits, owing to the stock market’s forward-looking nature, which is driven by assumptions about future profits. Corporate earnings are always calculated in reverse chronological order, beginning with the previous quarter’s figures. Thus, you should be scrutinizing earnings reports for these indicators as they serve as the basis for the stock market’s estimates of future profits, and so far the results have not been promising.

As a result, around 15 million Americans are 90 days or more behind on their vehicle loan payments, and as a result, the US economy has already begun to droop. Apart from that, the US is staggeringly indebted (the US national debt is growing at a rate of 46,848 dollars every second!). According to the National Student Loan Data System, more than 42 million students will have less than $100,000 in student loan debt by 2022, up from 37 million currently. Over 3.5 million students are in arrears on their student loans, with 810,000 owing more than $100,000. Over a quarter of those students had debts in excess of $200,000.

Additionally, the following statistics may be of interest to you:

In the financial industry, a “bear market” has been proclaimed when more than a third of the S&P 500’s equities have plummeted by more than 20%.

Corporations forecasted in their third-quarter earnings reports for 2021 that the cost of raw materials, labor, and other commodities used in the manufacture of products would increase in 2022.

The most recent trade war was cited as a significant issue by the vast majority of respondents. A 25% increase in retail pricing results in a 50% increase in retail prices, whereas a 10% increase in retail expenses results in a 300% increase in retail expenses. Import taxes have never been decreased since Biden took office, and with this prolonged trade war, the situation will only get worse.

Profitability significantly increased in 2021 as a result of the tax reduction, especially when earnings were compared “year over year.” Profits in 2021 naturally surpassed profits in 2022. However, when those results are announced, the tax rate has not been reduced, resulting in muted profit growth or acceleration due to COVID pandemic

Treasury bond prices are still increasing, but Treasury bond yields are declining. As a result of the Russian-Ukrainian War, interest rates on 10-year treasuries have declined from about 4% to around 3% as a result, coinciding with the current stock market downturn.