After the Tuesday market drop, digital currency markets, precious metals and stocks fell another leg on Monday. Market strategists believe that a significant Fed rate increase is imminent this week, making it one of the most difficult weeks in over three months.
Savita Subramanian, Bank of America’s analyst, believes that the U.S. Federal Reserve has “more work to do” and that an aggressive central bank could be “anathema to stocks that have benefited from low interest rates and disinflation.
Crypto, Precious Metals and Equities Show Volatility ahead of Fed Rate Hike — Pseudonymous analyst Plan B Says that Bitcoin and the S&P 500 are Correlated, but Are ‘Completely Separate Worlds
Global assets start of the week in the red as fed rate hike will be announced Wednesday
The Fed’s hawkishness may repel or kryptonite assets that have benefited from stimulus and monetary policy, Bank of America’s market strategists said this weekend. After a long week of trading activity, global assets have had a difficult start to Monday.
Wall Street’s four major stock indexes opened the day lower at 9:30 AM. The benchmark stocks experienced a slight recovery at 3:00 PM (ET) displaying extreme market volatility as well as uncertainty.
Subramanian and his team believe the S&P 500 will lose 8% more this year. In the last 24 hours, Bitcoin ( ) lost 1.67% while ethereum( Ethereum_) fell 1.79% against US dollars.
Precious metals such as silver and gold saw losses on Monday as well. Gold lost 0.12% while silver fell by 0.74% in comparison to the greenback. The U.S. has been highly correlated with bitcoin markets. BTC market analysts think bitcoin is a different animal than U.S. equities.
The pseudonymous analyst, Plan B tweeted Monday that “[Bitcoin] is correlated with S&P 500.” However, the S&P rose from $1K a $4K and [bitcoin] went from $10 a $20K during that same time. 4x versus 2K… totally different worlds. “Short-term movements are noise; long-term trends are the signal.”
The Fed has more work to do
Economists and analysts believe that the U.S. Federal Reserve would raise the target federal funds rates by 75 basis points this week. Subramanian, Bank of America, stated that the Fed still has a lot to do and that lessons learned from over four decades ago can help us combat inflation.
Stocks that have enjoyed low rates and disinflation may find a hawkish Fed anathema. “A hawkish Fed may be anathema for stocks that have benefited from low rates and disinflation (i.e. Subramanian’s view is based on the report Bank of America economists published in mid-July.
The bank’s economists had previously predicted a “growth recession” but the summer forecast indicated a “mild recession. Sven Henrich cited Jerome Powell, Fed chair,’s comments during a press conference in June. Henrich mocked Powell by noting that the central bank was about to carry out the third 75bps rate increase in a row.
Nearly every asset class is strongly connected to inflationary pressures, and the Fed’s Monetary Policy. However, the U.S. Dollar has continued to rise against other fiat currencies. The U.S. The U.S. Dollar Currency Index (DYX), which tapped 109.756 Monday afternoon (ET), saw the euro meet parity with its greenback for the first time since September 19. One Japanese yen is equal to $0.0070, while 10-year U.S. Treasury Notes reached an 11-year high of 3.518% on September 19.