It seems that stock market investors and cryptocurrency speculators needed a recession in the US to start buying stocks or crypto assets. U.S. stock indexes and bitcoin can count this month as quite successful.
Yesterday's data from the United States seems to show that the US economy has slipped into recession. This is commonly defined as two consecutive quarters of GDP decline, which is what happened in the US. However, the White House or the Federal Reserve are making it clear that there is no question of a recession and are, in a way, conjuring reality. It's all about the details and the way U.S. GDP is counted. In the first quarter, the main contribution to the decline in GDP was a bump in net exports. This time, the main contribution to the second quarter GDP decline seems to have been stocks and their decline. This was enough for the market to start playing more and more boldly for the end of the interest rate hike cycle by the Fed near the 3.25% level at the end of the year. Previously, investors estimated the possibility of ending the cycle at 3.50-3.75%. What's more, the market is starting to estimate the possibility of the Fed cutting interest rates by 0.5 percentage points by March 2023. It seems that this may be the reason for the improved sentiment in the financial markets.
As a result, the cryptocurrency market, which was somewhat pumped up by expansionary monetary policy, was able to take a breather after an earlier massive, albeit cyclical, correction. Bitcoin has risen in the neighborhood of $24,000, which could represent a rally of about 30% in July. This, in turn, could mean that BTC is possibly facing its best month since October 2021. Other cryptocurrencies, including ethereum, also saw a surge in value. The second largest cryptocurrency by market capitalization rose more than 70% in July, making it one of the best months ever for ETH.
Turning to stock market indices, these also seem to be rebounding this month. The technology Nasdaq is up more than 11% since the beginning of July, the S&P 500 seems to be up more than 8% this month, and the Dow Jones is up more than 5%. Perhaps the market has gotten over the recession theme, as the recession has become a reality and possibly investors may already be starting to think about the potential for improved economic performance. In addition, U.S. companies are not disappointing in their results as much as previously expected, which could also positively affect the price of indices overseas.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service)
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 82.59% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.