Following Jerome Powell’s hawkish commentary at the annual Jackson Hole Economic Symposium, major stock indexes, cryptocurrencies, and precious metals slid significantly in value. Over $240 billion was erased from the crypto market and the Crypto Fear and Greed Index continues to slide lower, edging toward “extreme fear.” Furthermore, the chief strategist at bubbatrading.com, Todd ‘Bubba’ Horwitz, explains that the Federal Reserve raising rates during a recession will wreak havoc on what’s left of America’s middle class.
Stocks and Crypto Spooked by Fed Chair’s Hawkish Statements — Bitcoin Markets Continue to Show a Strong Correlation With the 3 Major Benchmarks
After the Federal Reserve chair Jerome Powell explained that fixing the American economy and current price volatility will take “some time,” the central bank chief said, “some pain” would be felt by the Fed’s strict policy. After Powell’s statements in Wyoming, Wall Street shuddered and at the closing bell on Friday all three major benchmarks (S&P 500, Dow Jones, and Nasdaq Composite) were down more than 3%. Nasdaq was the biggest loser on Friday shedding 3.94% as it printed the worst losses since mid-June.
Markets more than a little spooked, with major indexes shedding more than 3%; Tech took it on chin with a 4.3% decline; Comm Serv & Cons Discr not far behind … MTD gains now being chipped away for broad indexes as only Russell 2000 and Russell 2000 Growth are up pic.twitter.com/W10NpeIwi3
— Liz Ann Sonders (@LizAnnSonders) August 26, 2022
The S&P 500 dove by 3.37% closing the day at 4,057.66 points and the Dow Jones Industrial Average shed more than 1,000 points or approximately 3.03%. The world’s top two precious metals, gold (Au) and silver (Au), lost between 1.13% (Au) to 1.79% (Au) to start the weekend. Platinum (Pt) slid by 2.38% and palladium (Pd) dipped 1.49% lower against the U.S. dollar.
Cryptocurrency markets did not deal with the Fed chair’s commentary well either as the crypto economy shed 6% on Friday and fell by another 4% on Saturday afternoon (EST). During Saturday’s late afternoon trading sessions (EST), the leading crypto asset bitcoin dropped below the $20K per unit zone for the first time since mid-July. On August 19, Bitcoin.com News reported on the Crypto Fear and Greed Index (CFGI) falling to a score of 33 after the CFGI rating moved higher up until August 14.
The CFGI score today is even lower than the 33 recorded nine days ago, as the current CFGI score is a 28 or “fear.” Similarly, the Cboe Volatility Index (VIX) saw a 3.78 point rise following Powell’s ten-minute speech. Nasdaq volatility has shown similar fluctuations as the VIX volatility gauge. Research shows cryptocurrency and bitcoin markets have been more correlated with equities markets than ever before.
The price of cryptocurrencies moved in sync with US stocks, making the correlation between digital assets and two key indices, the S&P 500 and Nasdaq, the strongest since 2010.
The close relationship has turned Bitcoin into a version of equities (not #PrivateEquity)@business pic.twitter.com/fMmYoJH2FS
— Mo Hossain (@MoHossain) August 19, 2022
Arcane Research highlighted the correlation back in May 2022 when researchers said: “Bitcoin’s correlation with the S&P 500 also continues to grind upwards, currently sitting at 0.59, also close to an all-time high.” Bitcoin (BTC) is 71% lower than the all-time high (ATH) printed on November 10, 2021, and ethereum (ETH) is down 69.6%. During the last three bear cycles, BTC has dropped more than 80% from its ATH, and ETH has slid 90% lower against the U.S. dollar.
Market Strategist Expects to See a 50 to 60 Percent Haircut in Equities Markets
Making matters less desirable, a number of strategists, analysts, and investors believe global markets are only going to get worse. The chief strategist at bubbatrading.com, Todd ‘Bubba’ Horwitz, told Kitco’s David Lin during a recent interview that stock markets could fall another 50% from here. Horwitz attributed his forecast to the Fed hiking rates amid what many believe to be a recession.
Horwitz further noted that the financial moves may be connected to the controversial Great Reset. ‘[The U.S. central bank is raising rates during a recession,” Horwitz said to Lin. “It’s never been done in history … There is a political agenda behind all of this stuff that’s going on, which is to try to create the Great Reset.” Horwitz further stressed:
[Biden’s] administration is looking to get the Great Reset. There is going to be no middle class left.
Horwitz also talked about Powell’s commentary at the Jackson Hole Symposium in Wyoming. The market strategist said: “[Powell’s] remarks are those of an idiot,” highlighting that at last year’s Symposium Powell stated that inflation was transitory.
“[Jerome Powell] is trying to get away from what’s going to happen, which is going to be hyperinflation,” Horwitz opined. “Wait until the price of oil starts skyrocketing again. What do you think is going to happen to inflation then? We’re going to have a food shortage this year. We’re going to have food riots in many countries,” the strategist added.
The bubbatrading.com analyst concluded that equities are going to suffer but there still may be some opportunistic value out there in commodities markets. “Overall, I expect to see a 50 to 60 percent haircut in these [equities] markets,” Horwitz said. “If anybody looks at their own finances, they can certainly see that it’s recessionary times and they’re watching their spending.”
What do you think about the recent stock market rout and crypto correlation? What do you think about Todd ‘Bubba’ Horwitz’s opinion that equities will see a 50% haircut? Let us know what you think about this subject in the comments section below.