So far 2022 hasn’t been kind to stocks and crypto with losses all across the board. Bitcoin lost 37%, of its value despite hitting an all-time high six months ago. Similarly, the S&P 500 dropped about 17%, since the start of the year.
However, some analysts would declare that not everything will continue falling for the rest of the year. Senior commodity strategist at Bloomberg Intelligence, Mike McGlone shared his latest insights on Twitter:
“If Stocks Are Going Limp, Bitcoin, Gold and Bonds Could Rule 2H — The propensity for Bitcoin to outperform most risk assets and gold most commodities, may play out in 2H, particularly if the stock market keeps succumbing to FederalReserve jawboning.”
Higher rates effect on stocks
Overall, market watchers are divided whether the Federal Reserve (Fed) will do too much too fast and if the stocks have already priced in everything that fast and large rate hikes can cause to stock prices. The Nasdaq index is down 28%, year-to-date (YTD) with most tech stocks negatively affected by rising rates.
For the Fed to rein in inflation, more rate hikes will probably have to be performed, which in turn will mean more volatility for the stock market in the short-term as McGlone also points out.
Higher rates effect on crypto and commodities
The two other major classes have a varied response to rising rates. Crypto has fallen this year despite it being promoted as a cure to all ills that can befall the market like rising interest rates, inflation, and lack of purchasing power.
Bitcoin’s descent began in November when the Fed initially announced that rates would be raised and market participants understood that liquidity might become an issue. However, analysts believe that higher institutional and retail active traders’ adoption will lead to crypto ending the year on a positive note.
Commodities, on the other hand, have had a solid year with some reaching all-time highs such as oil, wheat, and nickel. Some of these increases can be tied to Russia’s unprovoked invasion of Ukraine as fears of supply disruption and bans on Russian export took hold of the markets.
As geopolitical tensions continue, prices will likely remain elevated until the conflict is resolved and some normalcy is seen in the European markets.
Elsewhere, the recent covid-related lockdowns in China also brought about supply chain stress, which caused some price fluctuations.
Generally, interest rates will likely continue rising in 2022 with the million-dollar question being how high will they go. With solid earnings in the corporate U.S., and solid fundamentals for certain companies, now could be a good time to pick up some bargain stocks.
On the other hand, if prices continue plummeting then maybe an adage from Warren Buffett could help steady investors’ minds, namely: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.