Markets are caught in the crossfire after Jerome Powell’s speech. Participants are looking for a change. Is the worst over, or is there still more to come?
Powell’s Speech and the Contracting ISM PMI
We’d want to zoom out and explore the larger macroeconomic picture, as well as examine some of the most recent statistics released this week, which will have a significant impact on market direction in the coming months.
Following Jerome Powell’s Brookings Institution address, it’s evident that the market is eager to surge higher with any probable Federal Reserve action.
viewpoint and adapt situation. Overhedging, short squeezes, options market dynamics, and forced purchasing are all factors. It is beyond our scope to speculate on why the market is erupting with volatility in response to each one data point or fresh Powell speech. These sorts of occurrences and market moves, on the other hand, have almost always been an indication of unhealthy and exacerbated volatility swings in bear markets. Despite more rhetoric from Powell and nothing new being mentioned, the market regarded the speech as more “dovish” with his comments about the risk of over-hiking interest rates. However, if this is another bad market rally for the main indexes, we appear to be on the verge of seeing that rally reverse.
The trend is also worrying and is predicted to continue.
The pattern of economic shrinkage, as indicated by the ISM manufacturing index, is likewise worrying and is projected to continue (PMI). The most recent report reveals a print of 49.0, which is below market estimates of 49.7. New orders are reducing, the order backlog is contracting, and prices are decreasing. All indicators and survey responses point to demand dropping, circumstances deteriorating, and the economy entering more cautious zone. The ISM PMI data strongly coincides with the less influential Chicago PMI data, which recently showed contraction lows comparable to 2000, 2008, and 2020. This is an indication that an economic downturn is beginning in the manufacturing sector.
What does a slowing economy mean for the financial market? When there is terrible news, it is usually bad news.
What does a slowing economy mean for financial markets? When there is a continuous contraction trend of ISM PMI below 50, and even below 40, it is usually terrible news. We appear to be in the early stages of a wider shrinkage trend: the market’s despair phase.
The specific question for bitcoin and macroeconomics is now: Was this industry-leverage wipeout and capitulation event enough to muffle the possibility and consequences of an equity bear market meltdown? If stocks follow similar previous bear market downturn trajectories, would bitcoin flatline and create a bottom?
We have yet to witness a significant increase in stock market volatility, which has traditionally had an influence on bitcoin. It’s an important aspect of our thesis.
We have yet to witness a significant increase in stock market volatility, which has traditionally had an influence on bitcoin. This year, we’ve been predicting that bitcoin will follow traditional equities markets to the negative.
The scale of the long-term debt in real terms was, and continues to be, the most important story here.
What does this indicate for asset prices in the future?