Bank of America Market Strategist Says ‘Summer Rally Is Over’ as Crypto and Stocks Slide Ahead of Fed Rate Hike This Week – Economics Bitcoin News

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Dig­i­tal cur­ren­cy mar­kets, pre­cious met­als, and stocks dropped anoth­er leg down on Mon­day fol­low­ing the drop mar­kets saw last Tues­day. Last week’s fall was one of the worst weeks in more than three months as mar­ket strate­gists believe a siz­able Fed rate hike is com­ing this week. Bank of America’s ana­lysts led by Savi­ta Sub­ra­man­ian believes the U.S. Fed­er­al Reserve “has more work to do,” and an aggres­sive cen­tral bank may be “anath­e­ma for stocks that have ben­e­fit­ed from low rates and disinflation.”

Crypto, Precious Metals, Equities Show Volatility Ahead of Fed Rate Hike — Pseudonymous Analyst Plan B Says Bitcoin and the S&P 500 Are Correlated but Are ‘Completely Different Worlds’

A hawk­ish Fed may be like repel­lent or kryp­tonite to assets that prof­it­ed from eas­i­er mon­e­tary pol­i­cy and stim­u­lus, Bank of America’s mar­ket strate­gists led by Savi­ta Sub­ra­man­ian said in a note this past week­end. Glob­al assets are hav­ing a rough start on Mon­day as all four major stock index­es on Wall Street start­ed the day (9:30 a.m.) low­er fol­low­ing a grue­some week of trad­ing activ­i­ty last week. By 3:00 p.m. (ET), bench­mark stocks saw a slight rebound show­cas­ing extreme mar­ket volatil­i­ty and uncertainty.

Sub­ra­man­ian and his team pre­dict the S&P 500 will lose anoth­er 8% this year, and he fur­ther stressed that the “sum­mer ral­ly is over.” On Mon­day, dig­i­tal cur­ren­cy mar­kets slid 1.61% in the last 24 hours, and the cryp­to econ­o­my is now just above the $900 bil­lion mark at $933.17 bil­lion. Bit­coin (BTC) has lost 1.67% and ethereum (ETH) shed 1.79% against the U.S. dol­lar dur­ing the past 24 hours.

Pre­cious met­als like gold and sil­ver saw loss­es as well on Mon­day, as gold shed 0.12% and sil­ver dipped by 0.74% against the green­back. Bit­coin mar­kets have been extreme­ly cor­re­lat­ed with U.S. equi­ties, but some BTC mar­ket ana­lysts believe bit­coin is a very dif­fer­ent animal.

“[Bit­coin] and S&P 500 are cor­re­lat­ed,” the pseu­do­ny­mous ana­lyst Plan B tweet­ed on Mon­day. “How­ev­er, in the same peri­od that S&P increased 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 Market Strategist Says ‘Summer Rally Is Over’ as Crypto and Stocks Slide Ahead of Fed Rate Hike This Week
Chart shared by Plan B on Sep­tem­ber 19, 2022.

Bank of America Market strategists: ‘The Fed Has More Work to Do’ — Greenback Jumps Higher, 10-Year Treasury Notes Tap an 11-Year High

In the mean­time, econ­o­mists and ana­lysts sus­pect the U.S. Fed­er­al Reserve will raise the tar­get fed­er­al funds rate by 75 basis points this week. Bank of America’s Sub­ra­man­ian detailed that “the Fed has more work to do” and lessons from more than four decades ago can tell us a lot about com­bat­ing inflation.

“A hawk­ish Fed may be anath­e­ma for stocks that have ben­e­fit­ed from low rates and dis­in­fla­tion (i.e. most of the S&P 500), but lessons from the ’70s tell us that pre­ma­ture eas­ing could result in a fresh wave of inflation—and that mar­ket volatil­i­ty in the short-run may be a small­er price to pay,” the Bank of Amer­i­ca strategist’s note explains. Subramanian’s opin­ion fol­lows the report Bank of Amer­i­ca econ­o­mists revealed in mid-July.

At the time, the bank’s econ­o­mists said it pre­vi­ous­ly expect­ed a “growth reces­sion,” but the sum­mer fore­cast sug­gest­ed a “mild reces­sion in the U.S. econ­o­my this year.” On Mon­day, mar­ket ana­lyst Sven Hen­rich quot­ed Fed chair Jerome Powell’s state­ment dur­ing a press con­fer­ence last June, when Pow­ell said: “Clear­ly, today’s 75 basis point (bps) increase is an unusu­al­ly large one, and I do not expect moves of this size to be com­mon.” Hen­rich then mocked the Fed chair by not­ing the cen­tral bank is pro­ceed­ing to exe­cute the third 75bps rate hike in a row.

While near­ly every asset class under the sun is show­ing a strong con­nec­tion to infla­tion­ary pres­sures and the Fed’s mon­e­tary pol­i­cy, the U.S. dol­lar has con­tin­ued to sky­rock­et against oth­er fiat cur­ren­cies. The U.S. Dol­lar Cur­ren­cy Index (DYX) tapped 109.756 on Mon­day after­noon (ET) and the euro has met par­i­ty with the green­back once again. A sin­gle Japan­ese yen equals $0.0070 per yen, and 10-year U.S. Trea­sury notes tapped an 11-year high at 3.518% on Sep­tem­ber 19.

Tags in this story
10-year T notes, 75 basis point, 75 basis points, 75bps, Bank of Amer­i­ca, Bank of Amer­i­ca econ­o­mists, Bank of Amer­i­ca strate­gist, Bear­ish, Bears, bench­mark, Cen­tral Bank, Cryp­to, cryp­to assets, Dol­lar, DYX), eco­nom­ics, Fed, Glob­al Assets, gold, Hiked Rate, jerome pow­ell, Mild reces­sion, Plan B, Pre­cious Met­als, Pre­cious met­als (PMs), Rate Hike, Reces­sion, S&P 500, Savi­ta Sub­ra­man­ian, sil­ver, stocks, Sven Hen­rich, trea­sury notes

What do you think about the Bank of Amer­i­ca mar­ket strategist’s opin­ion about an aggres­sive Fed and the S&P 500 shed­ding anoth­er 8% by the year’s end? Let us know what you think about this sub­ject in the com­ments sec­tion below. 

Jamie Redman 

Jamie Red­man is the News Lead at News and a finan­cial tech jour­nal­ist liv­ing in Flori­da. Red­man has been an active mem­ber of the cryp­tocur­ren­cy com­mu­ni­ty since 2011. He has a pas­sion for Bit­coin, open-source code, and decen­tral­ized appli­ca­tions. Since Sep­tem­ber 2015, Red­man has writ­ten more than 6,000 arti­cles for News about the dis­rup­tive pro­to­cols emerg­ing today.

Image Cred­its: Shut­ter­stock, Pix­abay, Wiki Commons

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