The fear of a global recession has for now been sidelined by the U.S.- China trade agreement, according to the assessment made by investment banks. This is especially important for the bitcoin market and digital assets, which could benefit from a possible crisis. In this sense, the signing of the first phase of the agreement was an important indicator that trade tensions between countries will cool down and can help in the economy.
The subject is especially interesting for the digital assets market, since bitcoin has been seen as a gold-like store of value. It is worth remembering that the search for precious metal increases in times leading up to crisis or during them.
Last year, there was a perspective that bitcoin would get to US$ 20,000 if the U.S. and China failed to reach a trade agreement and war escalated.
But what do the banks say? According to Santander’s Asset Management area, the announcement of the trade agreement has solidified the perception that both countries are more committed to ending the escalation of commercial tensions that began in 2018 and which had a significant weight for the global slowdown in recent years.
The American and Chinese economies have shown more positive economic indicators recently. In China, the industrial production improved in November 2019, surprising the financial market. In the United States, in turn, unemployment has been fluctuating at historic lows.
Slow global growth in Credit Suisse’s view
Credit Suisse, on the other hand, projects a slow global growth, at 2.5% in 2020, at the same level as in 2019. However, the bank considers that a recession scenario remains unlikely thanks to favorable macroeconomic policies and the cooling of the U.S.-China trade war.
Throughout 2019, the bank reports that the imposition of U.S. tariffs on China and Chinese retaliation contributed to a 2% drop in global export volumes after the record high of 2018. Therefore, that was the biggest decline in recent decades, disregarding periods of recession.
The bank estimates that a partial resolution of the trade war would improve the profitability and mood of the markets both in the U.S. and China, which would reactivate capital expenditures in those countries. And that tariff relief will bring a possible recovery in industrial activity.
Trade agreement does not interrupt effects
And that’s also linked to the fact that the United States will maintain 25% tariffs on a wide range of US$ 250 billion in Chinese industrial goods and components used by U.S. manufacturing. China’s product tariffs will remain until the second phase of a trade agreement, yet not foreseen to occur.
While the two big banks predict relief based on the trade agreement, a global recession is still not something out of reality in the coming years. National monetary loosening may be altering the rational valuation of companies and a possible burst of bubble can cause a crisis in the markets.