In recent weeks, both the stock market and the crypto market have seen major declines. Does this possibly indicate a period of economic uncertainty? After peaking at 5,333 points on March 28, the S&P 500 saw a significant correction, falling below 5,120 points on April 12. This was the first time in four weeks that it fell below this threshold. This 2.9% drop since the peak coincided with a sharp decline in the value of bitcoin. But are there common causes behind these declines?
Inflation leads to doubts about interest rate policy
Persistent inflation is a major factor contributing to doubts about the Federal Reserve’s (the Fed’s) ability to effectively manage interest rates through 2024. These economic conditions are reflected in the problems faced by major US banks. On April 12, financial giants such as JPMorgan and Wells Fargo reported a significant 4% decline in their quarterly interest income.
JPMorgan’s CFO, Jeremy Barnum, pointed to a shift in customer behavior, noting an increased preference for certificates of deposit that yield more than traditional savings accounts.
This shift is partly why JPMorgan’s stock fell 5.7% that day, despite reporting a 6% increase in year-over-year net profits for the first quarter. CEO Jamie Dimon also highlighted the risks of geopolitical tensions and further quantitative tightening by the Fed.
Gold rises due to uncertainty
When traditional markets falter, typical safe havens like gold, which recently hit an all-time high of $2,431 on April 12, benefit. However, rising gold prices and higher US Treasury yields reveal deeper concerns about the economic outlook.
US 5-year Treasury yields hit a five-month high on April 10, a sign of investor dissatisfaction with yields below 4.5% amid ongoing inflation pressures. This situation complicates the refinancing of government debt and dampens companies’ enthusiasm to expand, given the more attractive returns on fixed income.
Source: https://bitcoinmagazine.nl/nieuws/inflatie-bankencrisis-bitcoin-aandelenmarkt-wankelen
