07/11 update below. This post was originally published on July 10
Stock markets are surging after Federal Reserve chair Jerome Powell fanned the flames of September interest rate cut hopes—just after issuing a “critical” warning.
Subscribe now to Forbes’ CryptoAsset & Blockchain Advisor and “uncover blockchain blockbusters poised for 1,000% plus gains” in the aftermath of bitcoin’s halving earthquake!
The S&P 500 and Nasdaq have notched fresh all-time highs, following in the footsteps of the Dow, which hit a peak in May, despite fresh debt spiral fears unsettling traders.
Now, as uncertainty hangs over the White House, one analyst has pointed to a surprise stock market warning light that’s just begun flashing red.
Sign up now for the free CryptoCodex—A daily five-minute newsletter for traders, investors and the crypto-curious that will get you up to date and keep you ahead of the bitcoin and crypto market bull run
Federal Reserve chair Jerome Powell has helped push stock markets higher, with the S&P 500, the … [+]
The recent bitcoin and crypto crash, that’s seen $500 billion wiped from the combined market in just over a month, could be about to trigger “an imminent S&P 500 summer correction,” Barry Bannister, managing director and chief equity strategist at Stifel, told MarketWatch.
07/11 update: The S&P 500 and the indexes fell sharply on Thursday, clocking their worst performance since late April, as recent big tech giant winners—including Nvidia, Apple and Tesla—crashed back.
The pull-back came after the latest inflation data accelerated expectations of a Federal Reserve interest rate cut in September, with interest rates futures now showing traders see an over 90% chance the Fed will cut rates by its September meeting, up from about 74% on Wednesday, according to CME Group’s Fedwatch.
“Clearly the continued downwards trend of headline inflation will lend weight to arguments for a Fed rate cut, as is largely expected by the markets in the fourth quarter this year,” Adrian Li, managing director at corporate finance advisor Centrus, said in emailed comments.
“Exact timing of a rate continues to remain uncertain though, and may ultimately depend on the Fed’s balancing of inflationary risks versus perceived risk of elevated rates to the continued strength of the U.S. economy. All eyes will turn now to any additional indications on direction of travel ahead of the rate decision at the end of the month, with the next non-farm payroll and unemployment rates not being released until early August.”
Bannister pointed to the correlation of bitcoin to stock markets and specifically the tech-heavy Nasdaq in recent years.
“It’s the availability of cheap, Fed liquidity that drives the price of bitcoin,” Bannister said. “Every single dovish pivot for the past 13 years has marked a sharp bitcoin increase, and bitcoin is a non-interest bearing asset that thrives on lower interest rates and available liquidity”—much like stock markets.
In his second day of Congressional testimony this week, Fed chair Powell said has “some confidence” inflation is falling but is not ready to declare the war on inflation won.
“Bitcoin has been a good leading indicator for the Nasdaq-100 over the years,” Jonathan Krinsky, chief market technician at BTIG, wrote in a note ahead of the S&P 500, Nasdaq and Dow climbing this week.
Sign up now for CryptoCodex—A free, daily newsletter for the crypto-curious
The bitcoin price has fallen sharply in recent weeks, stoking fears stock markets could follow it … [+]
For now, the momentum is with stocks as traders continue to bet on Federal Reserve interest rate cuts.
“Growing confidence over U.S. rate cuts kept the mood upbeat and the gains widespread,” Dan Coatsworth, investment analyst at broker AJ Bell, said in emailed comments.