U.S. stocks futures are pointing to gains on Friday following a muted session where traders struggled with rising coronavirus cases and disappointing unemployment data.
Total COVID-19 cases have reached more than 2.2 million in the U.S. — Texas, Arizona, California, and Florida reported their biggest ever one day increase — and 8.6 million worldwide. Meanwhile, the initial U.S. jobless totaled 1.5 million last week, more than expected.
While the economy continues to struggle and investors express concern about the second wave of coronavirus and geopolitical tensions, the stock market is approaching their all-time highs set in February before the March crash.
The Stock Market is in la-la Land
According to Kevin Smith, Crescat Capital’s CIO and, a Warren Buffett buff, the speculation in the market has created a new bold breed of millennial day traders.
The market is “insanely disconnected” from the underlying fundamentals. “Markets driven by euphoria never end well,” he said.
“The U.S. stock market today is in la-la land. It is discounting a new expansion phase of the economy at the same time as a major recession has only just begun.”
But the Federal Reserve’s unprecedented support to the market means being a bear may not be right at this point.
“(Fed) has pushed a flood of money into the market, and I think it’s foolish to stand in the way of it,” market researcher James Bianco told CNBC. According to him, the market is “destined to go higher,” and we may even get to have new highs before the end of the year.
Even JPMorgan is calling for an increase of 47% rally in equities. Dan Tapiero, the co-founder of 10T Holdings, called this a “super bold” and “daring call,” which would be contrarian if more people believed. He added,
“Maybe some excess cash goes into gold and bitcoin instead. Those markets still too small to absorb.”
Making the Case for Gold and Digital Gold
The logic is simple: don’t fight the fed.
As CNBC’s Jim Cramer said, “When bearish money managers throw in the towel after realizing they can’t fight the Fed or the tape, that’s like rocket fuel for the averages, and days like today are interludes that let you get on the rocket.”
Bitcoin is currently trading around $9,400, up about 150% from the March lows. Institutional interest in the world’s leading cryptocurrency has also heightened in recent months, especially after macro investor Paul Tudor Jones, announced that he has nearly 2% of his assets allocated to bitcoin and called it an inflation hedge.
Also, per the latest Fidelity report, a third of prominent asset managers own BTC, while nearly 80% find something appealing about it.
Crypto exchanges like Kraken, Binance, and service providers like River financials also see record new accounts from both retail and institutional investors, much of which is influenced by Fed’s quantitative easing and the stimulus checks.
As a Morgan Stanley executive makes a case for gold through monetary supply expansion, which is “going to be debasing to the dollar ultimately, and the Fed commitments, which (are) anchoring real rates,” the same could hold for digital gold.