Digital currency markets, precious metals and stocks were down another leg on Monday, following the fall markets seen last Tuesday. Last week’s decline was one of the worst weeks in more than three months as market strategists believe a significant Fed rate hike is on the way this week. Analysts at Bank of America, led by Savita Subramanian, believe the US Federal Reserve has “a lot of work to do”, and a dovish central bank could be “anatomy for stocks that have benefited from low rates and inflation”.
Crypto, Precious Metals, Stocks Show Volatility Ahead of Fed Rate Hike – Anonymous Analyst Says Plan B Bitcoin and S&P 500 are correlated but completely different worlds.
For assets that benefit from easy monetary policy and stimulus, a hawkish Fed could be like a recovery or kryptonite, Bank of America market strategists led by Savita Subramanian said in a note issued last weekend. Global assets are getting off to a rough start on Monday after a dismal trading week last week as all four major stock indexes on Wall Street started the day (9:30 am) lower. As of 3:00 pm (ET), benchmark stocks saw a slight rebound reflecting high market volatility and uncertainty.
Subramanian and his team predict the S&P 500 will lose another 8% this year and insist that “the summer rally is over.” On Monday, digital currency markets slipped 1.61% in the last 24 hours, and the crypto economy is now worth more than $900 billion at $933.17 billion. Bitcoin (BTC) traded down 1.67% and ethereum (ETH) traded down 1.79% against the US dollar in the last 24 hours.
Precious metals such as gold and silver saw losses on Monday, with gold down 0.12% and silver down 0.74% against the greenback. Bitcoin markets are highly correlated with US stocks, but some BTC market analysts believe that Bitcoin is a very different animal.
“[Bitcoin] and the S&P 500 are correlated,” said Plan B, the mock analyst He tweeted. on Monday. “However, the S&P has grown from ~$1K to ~$4K over the same period. [bitcoin] Jumped from ~$10 to ~$20k. 4x compared to 2000x… completely different worlds. Short-term movements are noise, long-term trends are the signal.
Bank of America market strategists: ‘Fed has more work to do’ – Greenback jumps higher, 10-year Treasury notes touch 11-year high
Meanwhile, economists and analysts are skeptical that the US Federal Reserve will raise the target federal funds rate by 75 basis points this week. “The Fed has a lot of work to do,” Bank of America Subramanian detailed, and lessons from four decades ago can tell us a lot about fighting inflation.
“The hawkish Fed may be anathema to stocks that have benefited from low rates and inflation (mostly the S&P 500), but the lessons of the ’70s tell us that premature easing can lead to new inflation — and market volatility. A short-term premium may be low,” explains a Bank of America strategist note. Souranian’s comments follow a report released by Bank of America economists in mid-July.
If the feds aren’t careful, something is going to break. pic.twitter.com/inTtO7CZaP
— Sven Heinrich (@NorthmanTrader) September 16, 2022
At the time, the bank’s economists had previously said they expected a “growth slowdown”, but the summer forecast indicated a “modest recession in the US economy this year”. Monday, market analyst Sven Henrik mentioned “Obviously, today’s 75 basis point (bps) increase is unusually large, and I don’t expect moves of this magnitude to be common,” Fed Chairman Jerome Powell said at a press conference last June. Heinrich then mocked the Fed chairman, saying the central bank was on track to implement its third consecutive 75bps rate hike.
While every asset class under the sun is showing a strong correlation to inflation and federal monetary policy, the US dollar continues to rise against other currencies. The U.S. Dollar Currency Index (DYX) touched 109.756 on Monday afternoon (ET) and the Euro regained parity with the greenback. One Japanese yen is worth $0.0070, and 10-year US Treasury notes hit an 11-year high of 3.518% on September 19.
What do you think of Bank of America’s market strategist’s opinion about a tighter Fed and the S&P 500 shedding another 8% by the end of the year? Let us know what you think about this in the comments section below.
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