Crypto News: Recession vibes are strong

The odds of a recession are growing.

That's the takeaway from a new survey of economists that Bloomberg recently conducted. The probability of a downturn in the next year is now 65%, up from 60% in February.

It feels like we've been saying this for months, but a few important events are now increasing the likelihood of trouble for the economy.

First, several bank closures including Silicon Valley Bank are inciting fears about the financial sector (although policymakers took steps to stem the contagion, are planning an overhaul of regulations, and may lean on big banks to cover the cost of the recent failures).

Then, the Federal Reserve continued with its planned interest rate hike in its March meeting, despite the banking drama. Plus, the looming return of federal student loan payments has some worried about the resulting impact to consumer spending. Perhaps no cohort will feel the restart quite like Gen Z, since those who graduated during the pandemic have never had to budget for it.

Layoffs are also increasing, with firms like Amazon, Accenture and McKinsey most recently announcing cuts. For those who took advantage of remote tech jobs to move to cheaper locales during the pandemic, a job loss can hit especially hard. My colleague Charlie Wells chronicled how transplants in so-called Zoom towns are grappling with a weakening labor market.

Other weird vibes: Investors are moving their cash out of banks and into money-market mutual funds, potentially a bad sign for the financial sector. Plus, Wall Street bonuses are down 26% this year — I know, I know, it's hard to feel bad about someone still getting a six-figure bonus, but the drop is another sign the economy is weakening.

And what about your investment portfolio? At least for now, the stock market isn't fazed. Money is flowing out of financial shares and into companies like megacap tech firms, with the Nasdaq 100 officially re-entering a bull market on Wednesday.

Still, it's never easy to invest during times of trouble. Matt Miskin, co-chief investment strategist at John Hancock Investment Management, recommends positioning yourself more conservatively and being thoughtful with your cash. For instance, high-yield savings accounts and Treasuries are offering attractive rates right now. He's also considering high-quality corporate bonds. We have more tips from experts here.

At the opposite end of the risk spectrum is a generation of retail traders playing with options that expire within a day. We took a deep dive into their high stakes world, which left me fascinated… but also very anxious. — Claire Ballentine

Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net or fill out this form.

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In Bloomberg Opinion this week, Jonathan Levin says to beware of buying stocks based on a break in rate increases:

History shows that monetary policy pauses mark great buying opportunities for US stocks, but there are several key caveats to bear in mind this time. Unlike most other recent hiking cycles, this would-be pause comes against a backdrop of rare high inflation. So even if the pause has arrived, policymakers might have to stay at this level for the foreseeable future to ensure that they don't drop the ball on their inflation mandate. It's hard to get excited about the end of the hiking cycle if cuts don't follow soon afterward.
The S&P 500 is already in an earnings recession that some strategists expect to deepen further. With the flood of government stimulus and unusual shift in consumption habits during the Covid-19 pandemic, many companies posted unsustainably strong earnings, and recent quarters were always going to appear weak by comparison. Add to that the blow of the Fed's unprecedentedly fast policy tightening, and it's easy to see why the earnings picture could deteriorate more quickly than normal.
Read his full argument here.

I hear that money market funds aren't FDIC insured. What should I do if I have cash in a money market fund?

First, you should confirm if it's a money market mutual fund or if it's a money market account. They are different — the money market mutual fund is an investment product that should be cash or cash-like investments, but there isn't a guarantee it's fully liquid. They could also have 'gates,' which means if there's large withdrawals from the money market mutual fund in a certain timeframe, the fund could limit the withdrawals and not be fully liquid.

Money market accounts are common at credit unions where you can write checks against them and take cash out. These are insured by the Federal Deposit Insurance Corporation. Money market mutual funds, on the other hand, are insured by the Securities Investor Protection Corporation (SIPC). SIPC is for security investments and protects clients if the mutual fund were to fail. If you have cash (excluding cash from your checking account to pay bills) at a bank yielding under 4% APY, move it to the money market mutual fund. — Jesse Whitsit, certified financial planner and portfolio manager at Morgan Stanley Wealth Management

Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net or fill out this form.