If a prediction of a recession causes the market to crash, can it be said that the prediction itself is part of the cause of the recession? Like a self-fulfilling prophecy?

Question

If a prediction of a recession causes the market to crash, can it be said that the prediction itself is part of the cause of the recession? Like a self-fulfilling prophecy?

In: Economics

Answer 1

No. Nobody cares about prognosticators. Follow the money. Credit markets are more sensitive than equity markets. BIG money (sovereign states and massive corporations) don’t hold cash, they put it in long or short term benchmark bonds – frequently, US Treasury bills (short term) and bonds (long term). When BIG money thinks that interest rates will be lower in ten years than in two years, the MONEY is planning on an economic slowdown.