- US stocks hit a record high on the back of global central bankers to provide additional stimulus
- The dovish signal has the dollar sliding against major currencies
- Gold climbs to near six-year highs while Bitcoin jumps above $9,800
- Stocks rallied on Thursday as Wall Street cheered the possibility of interest rates cut by the Federal Reserve next month.
The S&P 500 surged 1% to make a record close and the Dow Jones Industrial Average surged 249 points while the yield on the 10-year Treasury fell below 2% for the first time since November 2016. The energy sector gained more than 2% while Tech rose 1.4%.
“Markets are based on numbers and perception. If the perception is rates are getting cut, that’s going to drive markets higher,” said Kathy Entwistle, senior vice president of wealth management at UBS. “UBS’ stance up until yesterday was we wouldn’t see any rate cuts this year. Now we see a much larger chance of a 50-basis-point cut.”
Market’s Expectations For A Cut Rises
On Wednesday, the Fed said it is ready to battle growing domestic and global economic concerns in the backdrop of escalating trade tensions and growing concerns about inflation.
Policymakers have dropped “patient” from the Fed’s statement and acknowledged that inflation is running below its 2% objective. Chairman Jerome Powell said others agree that the case of lower rates is building.
Market participants are viewing the overall tone from the central bank as more dovish than expected.
“The FOMC reinforced the market’s conviction,” Steve Blitz, chief U.S. economist at TS Lombard, said in a note. “Barring a dramatic turnaround in the data, the next move is a cut – perhaps even a 50bp reduction.”
Dollar Takes A Hit, Gold And Bitcoin On Bull Rally
Meanwhile, the dollar took a hit against other major currencies.
These dovish signals may be able to take the stock market higher, for now, but it isn’t good in the long term and we can already see the effects on the greenback.
This could be why gold price shoots up to a near six-year high amidst these dovish signals from major central banks and rising tension in the Middle East. This combination combined with falling yields lifted gold 4% so far this week, the biggest one since the week ended on April 29, 2016.
Peter says ‘buy Gold to fight govt. money printing.’ Then he trashes #Bitcoin because it’s not government backed.
This is hypocritical and duplicitous, but he’s OK with it because he thinks he’ll make more money.
— Max Keiser, tweet poet. (@maxkeiser) June 21, 2019
A significant effect can be seen in Bitcoin which has climbed to $9,863, the latest new high of 2019 with 24 hours gains of 5.64 percent.
And so it begins…
An arms race of central banks around the world competing to devalue their currencies
Fiat will leak into scarce assets. And the scarcest asset in the world will disproportionately benefit.
It's like they're conspiring to pump BTC
Thank you for your service https://t.co/mcoo2pVGBE
— Brendan Bernstein (@BMBernstein) June 20, 2019
Till date in 2019, we are up 165 percent while making our way to $10,000 that will trigger FOMO driving BTC/USD prices higher to a new peak.