Weekly Market Update 13 - 06 - 2022 - Inflation at 40 Year highs, Nasdaq making new lows & Higher interest rates!

Welcome to your Weekly Market Update 

Global stock markets once again are falling sharply, after a very short-lived recovery.  

Fueled with the poor U.S. Inflation data last Friday, we saw fears about central banks once again required to take even more aggressive approach as they look to get ahead of the rising inflation rates. Topping levels we haven’t seen for 40 years.  

The U.S. 2-year Treasury rate hit highs it hasn’t seen since 2007 and for a brief was inverted again the 10-year rate. This is an indication of low confidence for long-term U.S. economic growth, signs of a potential recession looming. 

The Nasdaq has seen a decline of more than 11% in June alone! 

Chart of the Nasdaq 100. 

This week holds even further insight for global markets as we see several central banks discuss changes to their interest rates.  

We are set to see an increase of 0.5% in U.S. interest rates, but some are expecting the Federal Reserve to increase rates by 0.75% based upon the latest inflation reports from last week.  

Where the market was previously anticipating inflation to slow down, we have seen just how far behind central banks are. With energy prices soaring higher, their job becomes even harder as inflation rising is likely to be persistent.

Chart of Oil prices. 

With market movements picking up where they left off last week, heading lower on pre-market by as much as 3% on the Nasdaq, what is the likely impact if interest rates are raised higher than anticipated?  

The market doesn’t tend to enjoy surprises and reacts with extreme volatility when an unexpected event occurs. So, if we do see interest rates or monetary policy, approached in a manner more aggressive than previously laid out, we will likely see the market sell off continue.  

Crypto currencies have been no exception to the last statement we made.  

They are not proving to be the ‘Safe Haven’ or ‘Inflationary Hedge’ as many may have hoped, as a result they are being treated as any other ‘risky’ asset class, selling off at significant speeds.  

Today alone, we have seen Bitcoin fall by 10% and Ethereum by as much as 15%. It appears they are still very correlated to U.S. equities and the Tech market in particular, so it’s very unlikely to see a turn around until we see U.S. stocks climb higher.  

In addition to this, there are many concerns about companies with large Bitcoin holdings that are approaching levels where margin calls would be involved. If these do come to fruition, we may even see crypto currencies pick up even more selling pressure momentum.

Chart of Bitcoin. 

Until the next week’s Market Updates…Have a great trading week! 

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