Extreme Warmongering, Risky Assets Drop Widely, Housing Cools, UAE Plans to Increase Production, Gold Slides, Cryptos Crushed
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This week is not just about the Fed, but about the wrath of central banks who are mostly considering sweeping rate hikes. It is difficult to buy equities with this lackluster macro backdrop, lingering inflationary pressures, weak global growth and diminished earnings outlook. Pessimism for equities remains elevated as the US economy appears to have a one-way ticket to a recession as the Fed is poised to remain aggressive. The risks of a retest of the summer lows could easily occur if the Fed remains fully engaged in its fight against inflation.
US homebuilder sentiment continues its record downward trajectory. The National Association of Home Builders/Wells Fargo housing market index fell three points to 46, a ninth straight monthly decline. Almost a quarter of builders said they were cutting prices as rates jumped. Despite the rising costs of land, labor and materials, builders are lowering their prices. The housing market is cooling but there is still a long way to go.
Cryptos Beaten as Yields Soar
Cryptos are crushed as yields soar and pessimism grows for a deeper global slowdown. The entire cryptoverse is vulnerable to soaring borrowing costs and this risk remains at the forefront. This week could be the catalyst that sends the market towards prices at the peak of Fed tightening. This might be a time to rip the band-aid for bitcoin, as the selling pressure might get ugly here, but that might be what is needed to form a bottom.
Ethereum’s post-merger hangover also continues after the SEC’s Gensler suggests that Ethereum could now mean the crypto becomes regulated as a security. Ethereum was close to bottoming, but Gensler’s warning sparked another wave of selling.
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