Last week’s fall was one of the worst weeks in more than three months, as analysts believe a major Fed rate hike is expected this week. Bank of America analysts believe that the US Federal Reserve “still has work to do” and that an aggressive central bank could be “anathema to stocks that have benefited from low rates and disinflation.“
Crypto, Precious Metals, Stocks Show Volatility Ahead of Fed Rate Hike – The Analyst Plan B says bitcoin and S&P 500 are correlated but are “completely different worlds“.
Bank of America market analysts said in a note late last week. Global assets have a tough start to Monday. Wall Street’s four major stock indexes started the day lower after a tough week of trading activity last week. The benchmark stocks saw a slight rebound, highlighting the following extreme market volatility and uncertainty.
Bank of America analysts expect the S&P 500 to lose another 8% this year, and they further pointed out that the “summer rally is over.On Monday, digital currency markets slipped 1.61% in the past 24 hours, and the crypto economy now sits just above the $900 billion mark at $933.17 billion. . Bitcoin lost 1.67% and Ethereum lost 1.79% against the US dollar in the last 24 hours.
Precious metals like gold and silver also posted losses on Monday, with gold losing 0.12% and silver plunging 0.74% against the greenback. Bitcoin markets have been extremely correlated with US stocks, but some analysts believe bitcoin is a animal very different.
#bitcoin and S&P500 are correlated. However, in the same period that S&P increased from ~$1K to ~$4K, BTC jumped from ~$10 to ~$20K. 4x versus 2000x.. completely different worlds. Short-term moves are noise, long-term trends are the signal. pic.twitter.com/g50RV9U07g
— PlanB (@100trillionUSD) September 19, 2022
“The [Bitcoin] and the S&P 500 are correlated“, the Plan B analyst tweeted Monday. “However, over the same period, the S&P went from ~$1K to ~$4K, [bitcoin] jumped from ~$10 to ~$20K. 4x versus 2000x…completely different worlds. Short term moves are noise, long term trends are the signal.”
Bank of America strategists: “The Fed still has work to do” – Greenback climbs, 10-year Treasuries hit 11-year high.
Meanwhile, economists and analysts suspect the US Federal Reserve will raise the target federal funds rate by 75 basis points this week. Bank of America’s Mr. Subramanian clarified that “the Fed still has work to do” and that the lessons learned from more than four decades ago can teach us a lot about the fight against inflation.
“A hawkish Fed may be anathema to stocks that have benefited from low rates and disinflation (i.e. most of the S&P 500), but lessons from the 1970s tell us that premature easing could lead to a new wave of inflation – and short-term market volatility could be a lower price to pay“, explains the Bank of America note. Subramanian’s advice follows a report that Bank of America economists released in mid-July.
If the Fed’s not careful something is going to break. pic.twitter.com/inTtO7CZaP
—Sven Henrich (@NorthmanTrader) September 16, 2022
At the time, the bank’s economists said they previously expected a “growth 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 point (bp) rise is unusually large, and I don’t expect moves of this size to be common.Henrich then mocked the Fed Chairman noting that the central bank is proceeding with the execution of the third 75bp rate hike in a row.
While almost every asset class shows a strong link to inflationary pressures and Fed monetary policy, the US dollar has continued to soar against other fiat currencies. The US Dollar Currency Index (DYX) touched 109.756 on Monday afternoon (ET) and the Euro hit parity with the greenback once again. A single Japanese yen is equivalent to $0.0070 per yen, and US 10-year Treasuries hit an 11-year high of 3.518% on September 19.
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