Stock Market Eases Off of Record Highs, Gold & Silver Rally on Weak Dollar, Crypto to ‘Gain More Respect’

2021 has started on a volatile note with some asset classes making corrections following new peaks and others recording gains.

On the first day of its opening in 2021, Wall Street slid from the all-time highs as risk appetite ebbed amidst the surge in coronavirus cases and upcoming runoff elections in Georgia.

The Dow touched a record high only to be dragged down by over a 4% fall in Boeing Co’s shares. The S&P 500 also opened the year at a new peak of 3,756 only to drop 2.3%, currently it stands at 3,700.

Investing legend Byron Wien forecasts an almost 20% tumble in the first half of 2021 for the benchmark index but only for it to climb to 4,500 afterwards. At the beginning of 2020, he predicted the S&P 500 would pass 3,500 at some point.

Wien added that inflation will increase modestly, which means gold will rally while cryptocurrencies will “gain more respect during the year.”

Action Unfolding

Bitcoin has been making several new ATHs every other day and is already up 10% this year. However, BTC did see a 20% retracement on Monday, the biggest once since March sell-off. Ethereum ETH 2.74% Ethereum / USD ETHUSD $ 1,205.11
Volume 7.3 b Change $33.02 Open $1,205.11 Circulating 122.37 m Market Cap 147.47 b
10 mon Coinbase Predicts Substantial Growth of Newer L1 Chains & Institutionalization of Regulated DeFi 10 mon A Possible Crypto Recovery Moving Into New Year, Risk-on Sentiments Send The Stock Market to Another Record High 10 mon The Sandbox Game Is Migrating to Ethereum Sidechain Polygon and Launching A DAO in 2022
and the broad crypto market also saw some pullback.

“Hot Nasdaq stocks, Chinese internet plays and promising biotechs all of a sudden seem dull compared to the action unfolding in the crypto-currency space,” said Louis Gave, co-founder of Gavekal Research.

Meanwhile, gold climbed to an eight-week high, topping $1,900 an ounce on the back of a weaker dollar and lower US real yields. Today, the precious metal is aiming for $1,950.

However, it is silver enjoying an uptrend of 4.5%, going to $27.5.

More to Come

Real yields, that one gets on US government bonds after compensating for inflation, fell nearly to last year’s lows, driven by a rise in inflation expectations. As WSJ notes,

“with President-elect Joe Biden now making it clear that the recent $900 billion stimulus will ‘at best only be a down payment' and the now $3.3 trillion of total stimulus spending “is just the beginning,” it sounds like America is headed into a program of permanent stimulus.”

The money is obviously fueling the risk of inflation fires and continuing to push USD down, which has been keeping under 90 for over a week now.

And this weaker dollar is also playing a role in Bitcoin’s furious ascent.

“The last time the dollar saw a larger six-month decline was in the second half of 2017. That’s also the same time that Bitcoin first started to go mainstream.”

Paul Hickey Bespoke Investment Group

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