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Panic gripped the markets. Sales don’t just stop

The stock markets have had a chaotic week behind them, which has been in the spirit of tightening monetary policies by their authorities. The American, British but surprisingly also the Swiss central bank reached an increase in interest rates. This is bad news for stocks, which experienced the worst week comparable to the weakest weeks in 2020, when a coronavirus pandemic hit the world with huge loss of life.

At the end of the working week, stock markets erased some of the losses, but even so, the past week was the worst for them in almost two years. The US S&P 500 lost 5.8 percent, the Dow Jones and the Nasdaq then identically 4.8 percent. In Europe, weekly losses also remained well above four percent. The German DAX lost 4.6 percent and the British FTSE 4.4 percent.

And the great volatility of the market, according to analysts, will not just disappear. The persistently high inflation is to blame, which makes investors nervous. “The market will fluctuate until it is clear that inflation has indeed peaked,” said analyst Megan Horneman of Verdence Capital Advisors.

Shares could fall by at least another ten percent, the analyst said

Money

After a week of relative calm on the stock markets, a quick sell-off returned to them on Friday afternoon. Investors are frightened mainly by rising inflation. “The US Federal Reserve is expected to have to take action against inflation by tightening monetary policy more quickly and sharply,” said Jiří Tyleček, an analyst at XTB. According to him, therefore, there is still room for a double-digit decline in stock indices.

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Most central banks, led by the US Fed, have begun to move from loose monetary policy to tightening measures that increase the risk of economic slowdowns and recessions.

“Inflation is now the highest in the United States in more than 40 years,” said Štěpán Křeček, chief economist at BH Securities. “Investors are worried they will grow because of it US interest rates even morethan previously announced by the US Federal Reserve (Fed). The market is reacting to this with a sharp decline, “explains Křeček.

Last week, the Fed raised its key interest rate by 75 basis points. This is the sharpest rate hike in the United States since 1994. “It’s a force the Fed has so far rejected. We see an accompanying increase in bond yields, which is lowering stock valuations, ”says Tomáš Pfeiler, Cyrrus’s portfolio manager.

The Swiss central bank also unexpectedly raised rates by raising rates by half a percentage point to -0.25 percent, and the British Central Bank (Bank of England) also tightened its monetary policy. It increased the rate for the fifth time in a row by 25 points to the current 1.25 percent.

The bottom is yet to come

Raising rates drains liquidity and incurs losses on a number of assets. The stock marketers are still hesitant about the direction the Fed will take and what impact it would have on the economy. The expectations of the Fed members themselves speak of rates at 3.5 percent at the end of this year. That is twice the current range of 1.50 – 1.75 percent.

According to analysts, the decline in stock markets is not over. “The decline will continue until we see a meaningful slowdown in inflation numbers. Until inflation peaks, investors will constantly reevaluate their bets on the number of rate hikes, which could cause turbulence, ”thinks Pfeiler.

In addition to inflation now Investors’ attention is focused on unemployment in the United States. “Everyone knows that when people have jobs, crises and greater difficulties will be avoided in the US economy. But once unemployment starts to rise, it will lead to a further significant deterioration in market sentiment, ”says Křeček.

The crypt market went into free fall

A look at the development of cryptocurrency prices, including bitcoin, is reminiscent of a free fall. Bitcoin has fallen from $ 46.8 thousand (1.1 million crowns) to $ 20.2 thousand (475 thousand crowns) since the beginning of this year. Ever since large institutional players began investing in digital currencies, their development has been copying price movements of other risky assets. For example, shares of young technology companies. “When stock markets take risk aversion, this type of asset weakens significantly,” Pfeiler said.

The fall of bitcoin.  After a year and a half, the cryptocurrency looked under $ 25,000

Bitcoin has not been this low for 18 months. Is it time to shop? Probably not, traders say

Money

A number of investors are beginning to grow, according to which bitcoin can fall to a value in thousands of dollars. It currently falls below $ 24,000, the lowest price of bitcoin in a year and a half. And other cryptocurrencies, led by ether, are also falling. Reason? Outflow of investments from risky assets due to the threat of rising inflation.

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The high prices of bitcoin and other virtual coins were mainly related to the extremely relaxed policy of central banks. “Once central banks have turned the helm and liquidity is slowly drying up, previous euphoric prices make absolutely no sense,” adds Pfeiler.

Already last Christmas, a number of provocative commentators predicted that bitcoin would drop to $ 10,000 this year. “It simply came to our notice then. However, it is possible that he will choose this turn of death before he looks below the ten thousand dollar mark, “Křeček thinks. “From a long-term perspective, however, it is true that bitcoin has a place to fall, and we have experienced the fading of the last two years of development on the market many times in history with different types of assets,” concludes Křeček.

Bill Gates during the Global Investment Summit in London on October 19, 2021

Gates: Only fools and even bigger fools invest in the crypt

Leaders

The phenomenon of cryptocurrencies and the NFT is 100% based on the theory of the bigger fool, said billionaire and their opponent Bill Gates. He commented at a time when bitcoin in particular was experiencing a big drop in its price.

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gold, gold bars

Gold was supposed to protect against inflation. So why is its price falling?

Money

Gold is portrayed as a safe haven in times of uncertainty and inflation in particular. This is how retailers offer it to small clients as well. In the last quarter, the price of gold fell by more than five percent.

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