What is shorting and how can it work amid recession fears?

Leading investment firms are shorting US stocks as the global recession-linked fears become more and more severe. The approach is focused on shorting US stocks worth billions of dollars. This wave of selling short is a wager that the market would be under pressure as recession fears intensify. The possibility of a global recession has grown increasingly obvious in recent months as the dominance of the US dollar continues to decline and major banks also experience negative effects.

The biggest investors, some of whom are likely from the Middle East, transferred their portfolio into short-term US treasuries after selling short US stocks. According to reports, the most recent action was motivated by worries about a potential worldwide economic downturn, this is why there are moves for amassing massive short position on US equities that is said to be worth billions. These investors also boost exposure to the US once valuations improve and the Fed signals it’s gearing up to cut interest rates.

A venture into the world of cryptocurrency and commodities has been followed by news media. The specifics and details of these investments are still undisclosed, though.

While this has been going on, the US economy has been struggling as a result of the failure of some of its biggest banks, which has caused a dramatic drop in stock prices. It is important to note that these Middle Eastern investors are moving their money into the cryptocurrency and commodities markets, maybe in an effort to profit from the current economic situation.

More investors are looking to alternate markets like cryptocurrency and commodities while the global economy remains unreliable. This is due to the fact that up to this point, only these markets have shown themselves to be resistant to a potential future global recession.

IMF head Kristalina Georgieva issued a warning earlier this year about a global recession that will hit one-third of all economies. In an interview, the managing director of the International Monetary Fund said that 2023 will be a difficult year for the world economy, with China possibly posing the biggest threat.

For the first time in 40 years, according to Georgieva, China’s growth in 2022 is expected to be equal to or lower than the rate of world growth. The managing director of the International Monetary Fund emphasised that the ongoing conflict between Russia and Ukraine is likely to blame for the slowdown in China’s economy, which is already noticeable in the EU.

We anticipate that one-third of the global economy will be in recession, said the IMF chief. For hundreds of millions of people, it would feel like a recession even in nations that are not experiencing one.

Despite the anticipated global recession, the global crypto market has remained stable and is receiving less media coverage. The market capitalization of all cryptocurrencies worldwide has increased by more than 1% in the last day, reaching a value of more than $1.2 trillion.