Digital currency markets, precious metals and stocks fell another leg on Monday after the markets plunged last Tuesday. Last week’s decline was one of the worst in more than three months as market strategists believe a sizable Fed rate hike is coming this week. Bank of America analysts led by Savita Subramanian believe the Federal Reserve US “has more work to do” and an aggressive central bank could be “anathema to bonds that have benefited from low rates and disinflation”.
Cryptocurrencies, Precious Metals, and Stocks Show Volatility Before Fed Rates Hike – Pseudonymous Analyst Plan B Says Bitcoin and the S&P 500 Are Related But They Are “Completely Different Worlds”
An aggressive Fed could be like repellent or kryptonite for assets that have profited from easier monetary policy and stimulus, Bank of America market strategists led by Savita Subramanian said in a statement last weekend. . Global activity is off to a rough start on Monday as all four of Wall Street’s major equity indices started the day (9:30 am) down after a gruesome week of trading activity last week. At 3pm (ET), the benchmark stocks rebounded slightly, demonstrating the extreme volatility and uncertainty of the market.
Subramanian and his team predict that the S&P 500 will lose another 8% this year and further stressed that “the summer rally is over”. On Monday, digital currency markets slid 1.61% in the past 24 hours and the cryptocurrency economy is now just above the $ 900 billion mark at $ 933.17 billion. Bitcoin (BTC) lost 1.67% and ethereum (ETH) lost 1.79% against the US dollar in the past 24 hours.
Precious metals like gold and silver also took losses on Monday as gold fell 0.12% and silver 0.74% against the greenback. Bitcoin markets have been extremely correlated with US equities, but some BTC market analysts believe that bitcoin is a very different animal.
“[Bitcoin] and S&P 500 are related, “pseudonymous analyst Plan B tweeted on Monday. “However, over the same period that S&P increased from ~ $ 1K to ~ $ 4K, [bitcoin] it went from ~ $ 10 to ~ $ 20,000. 4x vs 2000x … completely different worlds. Short-term moves are loud, long-term trends are the signal. “
Bank of America Market Strategists: “The Fed Has More Work to Do” – Greenback Climb Higher, 10-Year Treasury Bills Hit 11-Year High
Meanwhile, economists and analysts suspect the US Federal Reserve will raise its federal funds target rate by 75 basis points this week. Bank of America’s Subramanian explained in detail that “the Fed has more work to do” and lessons from more than four decades ago can tell us a lot about fighting inflation.
“An aggressive Fed may be anathema to stocks that have benefited from low rates and disinflation (i.e. most of the S&P 500), but the lessons of the 1970s tell us that premature easing could lead to a new wave of inflation and that short-term market volatility may be a lower price to pay, ”the Bank of America strategist explains Subramanian’s view follows the report revealed by Bank of America economists in mid-July.
If the Fed isn’t careful, something will break. pic.twitter.com/inTtO7CZaP
– Sven Henrich (@NorthmanTrader) September 16, 2022
At the time, the bank’s economists said they previously expected a “growing recession,” but the summer forecast suggested a “slight recession in the US economy this year.” On Monday, market analyst Sven Henrich quoted Fed Chairman Jerome Powell’s statement at a press conference last June when Powell said, “Clearly, today’s 75 basis points (bps) hike is unusually large and I don’t expect moves of this size to be common. “. Henrich then teased the Fed chairman by noting that the central bank is proceeding to execute the third consecutive 75bp hike.
While almost all asset classes under the sun are showing a strong connection with inflationary pressures and the Fed’s monetary policy, the US dollar has continued to skyrocket relative to other fiat currencies. The US dollar currency index (DYX) hit 109,756 on Monday afternoon (ET) and the euro met parity with the greenback once again. A single Japanese yen equals $ 0.0070 per yen, and US 10-year Treasury bills hit an 11-year high of 3.518% on September 19.
What do you think of the Bank of America market strategist’s opinion on an aggressive Fed and the S&P 500 down another 8% by the end of the year? Let us know what you think about this topic in the comments section below.
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