With Bitcoin breaking historical highs recently and the US stock market continuously breaking new highs, there have been concerns on Wall Street.
Recently, JPMorgan Chase said in the latest report that the record rise of Bitcoin means that the foam in risky assets is growing, which may cause the Federal Reserve to postpone its interest rate cut plan later this year.
"Foam is accumulating"
Driven by the potential decline in global interest rates and the approval of Bitcoin ETFs by the US Securities and Exchange Commission (SEC), Bitcoin prices surged to a historic high on Tuesday, reaching a high of $69202, surpassing the historical peak of $68999.99 reached in November 2021. Since October last year, the price of Bitcoin has surged by nearly 160%, with a 44% increase in February alone this year
Marko Kolanovic, a strategist of Little Mall, said in the report that the price of Bitcoin exceeded $60000, and the stock market hit a record high, indicating that the "foam" began to accumulate in risky assets. This foam may eventually lead the Federal Reserve to postpone the interest rate cut plan, because the interest rate cut may trigger a new round of inflation.
Kolanovich said:& Quota; This may keep monetary policy high for a longer period of time, as premature interest rate cuts may further push up asset prices or lead to inflation rising again& Amp; Quota;
According to data from the CME Federal Reserve Observation Tool, the market currently expects the Federal Reserve to cut interest rates at least three times in 2024, with the first rate cut expected to occur in June.
Since October last year, driven by the gradual cooling of inflation in the United States and expectations of the Federal Reserve's interest rate cut, the US stock market has continued to rise. However, since January this year, due to the slower than expected cooling of inflation in the United States, Federal Reserve officials have begun to signal a possible delay in interest rate cuts, and the market has also postponed the expected time for the Federal Reserve's first interest rate cut of the year from March to June. If the Federal Reserve further delays the rate cut, it may have a negative impact on the bullish outlook of the stock market.
Kolanovich believes that in the current economic context, the Federal Reserve will not be in a hurry to cut interest rates. He quoted recent comments from Federal Reserve Director Christopher Waller, saying that if the trend of inflation cooling is perfect, "what's so urgent?"
Xiaomo still insists on being bearish on US stocks
Overall, Kolanovich continues to lean towards bearish sentiment towards US stocks. He said:
Kolanovich said, "Stock volatility has been around multi-year lows, which makes us nervous because stock prices are expensive (relative to bonds and cash), mainly concentrated in large stocks, overly reliant on artificial intelligence stories, and the market seems to see zero risk of economic growth."
Kolanovich has set a target price of 4200 points for the S&P 500 index, which means there is a possibility of an 18% drop from the current level.
It is worth mentioning that Kolanovich is a staunch bearish investor in the US stock market on Wall Street. Since the end of 2022, he has been holding a bearish stance on the US stock market. However, the S&P 500 index has accumulated a growth of 24.23% in 2023, and has grown by 8.12% since the beginning of this year, indicating that he may have been overly pessimistic about the US stock market before.