US close – A very bad half, US data supports aggressive Fed tightening for now, bitcoin falls below USD 20k

Market Market Pulse · 06 Jul 2022 136 Views

A global central bank effort to fight inflation is driving rising recession fears that has given Wall Street the worst half of the year since 1970. Added volatility from the final trading day of the quarter is especially crazy because so many investors are rebalancing their portfolios with recession stocks.

US stocks pared losses as too many investors feel we are getting close to the bottom and that now isn’t that bad of time to start to scale into a longer-term position.

US Data

A wrath of US data all drove home the point that recession risks continue to grow.  The economy is clearly weakening as US consumer spending is softening, the labor market remains in good shape, and as inflation is slowly cooling. The Fed seems on a set course to raise rates by 75 basis points at the July meeting and possibly stay aggressive into the fall. If inflation slowly declines and the labor market remains in decent shape, the Fed could remain aggressive with the tightening of policy.     

Cryptos remain vulnerable

It seems everyone is becoming a snowbird and avoiding this crypto winter.  With risk appetite gone missing as the S&P had its worst first half in decades, the news that SEC rejected Grayscale’s application to turn its bitcoin fund to an ETF was the straw that broke the camel’s USD 20,000 level back.  Negative crypto headlines have been nonstop and fresh concerns that the regulatory environment will be rather harsh going forward has really kept sentiment down. The news was not all terrible as FTX nears a deal to acquire crypto lender BlockFi in what seems like a steal at USD 25 million. 

If the bloodbath on Wall Street remains the theme in the third quarter, bitcoin could be vulnerable to one more ugly plunge that could have many traders fearing a fall towards the USD 10,000 area.  

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