The risk-off season is upon us, and nothing is safe except the dollar! The bloodbath continues from stocks to crypto, and much of it started when The Fed increased interest rates by 50pts last week. The point of rate hikes is to slow down a ballooning economy and bring inflation down. However, low growth also means a looming recession and worse stagflation – no growth and high prices!
Poor earnings from the top companies also played a part in price action last week, and over the weekend, BTC, the apex crypto, dropped through support, touching 33k down from 47k in March. This led to the whole crypto market selling off close to 300billion from May 5th.
Most investors will be sitting on cash, dollars specifically, waiting by the sidelines for the bottom unless they’re already underwater. The same applies to Stocks, with the S&P 500 posting its fifth straight weekly drop, the longest losing streak since June 2011.
What about Gold? The traditional inflation hedge isn’t safe either, but it hasn’t been hit as hard, dropping 10% from its recent all-time high. Aside from the dollar, commodities have been on the rise and have remained a safe bet. However, as growth slows, so will the demand for products and the resources needed to create them.
An outlier to this is Oil which has been steadily rising since the onset of the Ukraine war. On Sunday, the G7 committed to phasing out imports of Russian Oil whilst the EU plans to remove reliance on Russian Oil altogether by 2023. This means we could see the oil price continues to rise as EU countries source new suppliers. Brazil enters the chat.
Week Ahead
USA – CPI is out on Weds and will be the key indicator of whether we are past the peak of inflation. A print of less than 8.5% will show the economy is on the right track.