This Wednesday, investors’ attention will be focused on the U.S. central bank as Federal Reserve policymakers are expected to aggressively raise the benchmark interest rate. Leading U.S. stock indexes suffered significant losses over the week, with the Nasdaq composite index showing its worst start in four months since 1971. Cryptocurrency markets also had a rough week, with the crypto economy losing 8.99% against the US dollar since April 25, dropping from $1.967 trillion to $1.79 trillion.
The Fed expects an aggressive increase in the benchmark interest rate, with Dutch bank ING forecasting a 50bp increase and the announcement of a tighter QE
A number of financial institutions, analysts and economists expect the Federal Open Market Committee (FOMC) to raise interest rates next week in an aggressive manner. Reuters writers Lindsey Dunsmuir and Ann Safir reported on Friday that “there could be a big Fed rate hike ahead,” and the authors also cite two reports claiming that “hot inflation has peaked.”
“U.S. Federal Reserve policymakers appear likely to pursue a series of aggressive interest rate hikes at least through the summer to deal with hot inflation and rising labor costs, even though two reports Friday showed preliminary indications that both may have peaked,” the report explains.
In addition to the Reuters report, Dutch multinational banking and financial services corporation ING Group believes a significant rate hike will occur this Wednesday. In a report , ING expects the FOMC and Fed Chairman Jerome Powell to announce a 50 basis point rate hike. The ING report states that “concerns about inflation outweigh the temporary decline in GDP.”
“The Federal Reserve is widely expected to raise its discount rate by 50 basis points next Wednesday as inflation above 8% and a tight labor market outweigh the unexpected first-quarter GDP contraction associated with temporary trade and inventory problems,” ING Group said in an April 28 report. While 50 bps. – is a significant increase, ING also believes the Fed will unveil a tightening plan when it comes to the central bank’s monthly bond purchases.
“We will also expect the Fed to formally announce quantitative tightening on Wednesday,” ING said in a report.
Wall Street suffers defeat, gold gains macroeconomic gains
Meanwhile, as Wall Street closed the day Friday, all the major U.S. stock indexes suffered a bloodbath during intraday trading sessions. The Nasdaq, Dow Jones Industrial Average, S&P 500 and NYSE all fell significantly before the weekend began. Reports show that the Nasdaq composite had its worst four-month start in more than 50 years, and the S&P 500 also fell like a rock on Friday.
“By the end of trading Friday, the sell-off had intensified, and we were facing the worst start to the year since the Great Depression,” wrote Barron’s author Ben Levison.
At the end of the week, gold reaped the rewards of the storm, with the precious metal showing steady gains against the U.S. dollar also in the run-up to the weekend. On Saturday, an ounce of pure gold was up 0.08% and 6.47% over the last six months. An ounce of pure gold is currently selling for $1,896. Trend forecaster Gerald Celente believes that as long as inflation is rising, precious metals will follow.
“The higher inflation gets, the higher the safe-haven assets gold and silver will rise. And when bankers raise interest rates, it will very much bring down Wall Street and Main Street. and the harder they fall, the higher precious metals prices will rise,” Celente tweeted on Saturday.
Fear is causing “fears of a bear market in 2018,” Bitfinex market analysts say cryptocurrency buyers are staying away
The crypto economy also suffered this week, and markets correlated with stock markets. Michael van de Poppe, CEO and founder of eightglobal.com, tweeted about the fear in the cryptocurrency markets on Saturday. “The amount of fear in the markets right now about the upcoming Fed meeting is comparable to the bear market swings of 2018,” the Eightglobal founder said “That says a lot for the markets and bitcoin.” On Saturday night (ET) around 7:25 p.m., bitcoin (BTC) fell below the $38K mark to $37,597 per unit.
Since April 25, 2022, the net value of the entire crypto economyhas dropped from $1.967 trillion to today’s $1.79 trillion. While the crypto economy has lost 8.99% since then, it has lost 1.2% in the last 24 hours. Bitcoin (BTC) lost 4.9% this week, and ethereum (ETH) lost 7.6% against the U.S. dollar in the last seven days. In a note sent to Bitcoin.com News on Friday, Bitfinex market analysts explained that “bitcoin is trading in a range as buyers stay away.”
“The afternoon trading frenzy that characterized the blockchain period, when so-called meme stocks soared to unearthly valuations, already seems to be a thing of the past,” the analysts added. “Robinhood cut staff amid falling earnings as bearish sentiment took root in the stock market.” Nevertheless, it is interesting to note that the share of bitcoins that have not been in use for a year or more reached a new all-time high this month, according to analyst firm Glassnode.”
What do you think about the outlook for global markets such as gold, cryptocurrencies and stocks. Do you think the U.S. Federal Reserve will raise the benchmark rate by 50 bps. Let us know what you think about it in the comments section below.
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