Stock markets continue to hit record highs with the S&P 500 and Nasdaq heading upwards in late June buoyed by the news that the Federal Reserve Chair Jerome Powell might cut rates in September. Despite Powell going to town on debt late last year and continuing to issue warnings about its corrosive effect on the market, and given traders’ apprehensions about political developments in the White House, and with the cryptocurrency market making dramatic falls, some analysts expect markets to correct themselves.
The recent dramatic drop in bitcoin and other cryptocurrencies, in which more than $500 billion in market value has vaporised, has landed the asset on the radar of market strategists. Among several observers, Barry Bannister from Stifel and Jonathan Krinsky from BTIG have observed a tight correlation between the direction of bitcoin and the stock market – and between bitcoin and tech-heavy indexes such as the Nasdaq. Lower interest rates – a common result of Fed dovishness – and boosts to monetary liquidity have fueled both market valuations and non-interest-bearing assets like bitcoin in the past.
All told, sentiment remains robust in the stock market where investors are flush with optimism that the Fed could cut rates, even as the near-term financial and political backdrop keeps getting more uncertain. For his part, Powell continues to sound hawkish on inflation and, while we’re not there yet, so a lot could get thrown into the mix in the months ahead.
Source: Forbes
