With a focus on the health of the U.S. economy, the data-driven research platform Trading game warned of potentially disastrous consequences based on the performance of specific measures.
In an X (formerly Twitter) job On May 3, the platform suggested that the economy faced a bleak outlook, primarily based on the trajectory of U.S. government debt markets, indicating that it appeared to be collapsing.
“The collapse of the US government debt market has begun. This has MASSIVE implications for the economy,” the platform notes.
According to the analysis, US government bonds broke a 40-year bull trend, with prices falling to levels not seen since 2013. The unprecedented decline made one of the most vicious bear markets since the 1980s , inflicted significant losses on investors, particularly those heavily invested in Treasury bonds.
The performance of gold
Adding fuel to the fire is the outperformance of gold, which has surged 170% since March 2020, eclipsing the performance of Treasury bonds. The surge in gold prices comes amid growing government spending, which has risen from $3.4 trillion to nearly $4 trillion in just two years, according to data provided by the Game of professions.
Indeed, in recent months, public spending has been a major concern for economists, highlighting that the situation could affect the dollar.
Additionally, the platform highlighted the role of increased government spending, financed by increased issuance of treasury bonds, as an important factor contributing to potential market turbulence.
Game of professions noted that Treasury bond issuance is expected to reach $1.9 trillion in 2024, surpassing levels seen during the 2008 financial crisis. This has notably raised concerns about the sustainability of public debt.
Workforce Involvement
Additionally, the researchers pointed to a confluence of factors driving the Treasuries breakup, including a decline in the labor force participation rate. According to data shared by the entity, the correlation between increasing U.S. government debt and declining labor force participation over the past two decades has become increasingly evident, signaling economic strain as more and more people are retiring and fewer are participating in the labor market.
This comes notably after the latest US jobs report revealed a decline, with employers adding 175,000 jobs last month, compared to an expected increase of 243,000.
“One of the main factors behind this long-term collapse in Treasuries is the decline in the activity rate. This is strongly correlated with the increase in US government debt over the past 20 years,” Game of Trades added.
Somewhere else, Game of professions noted that the aging of the U.S. population and the impending retirement of baby boomers are further compounding economic challenges, requiring increased government spending. However, the analysis raised doubts about the likelihood of significant changes in spending habits in the near future, exacerbating concerns about rising public debt.
Safe haven for investors
In light of these developments, attention is now turning to assets that can protect investors against a potential economic crash. In this regard, researchers have highlighted the recent meteoric rise of gold.
Experts noted that while gold may encounter resistance in the near term, ongoing issues plaguing U.S. debt suggest its breakout could have further upside potential.
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