- Bitcoin following gold while stocks back on the rise
- Deja Vu? Recession fears rears its ugly head again
The Federal Reserve has approved a widely expected interest rate cut but gave few hints of whether further reductions are ahead.
Following its meeting, the central bank announced that it would take down its benchmark overnight lending rate to a range of 1.75% to 2%.
The US economic outlook, Fed Chair Jerome Powell said is “favorable” with strong labor market and inflation likely to return to Fed’s 2% goal.
This came just two months after the Fed made its very first cut in 11 years.
Just yesterday, Fed directly injected billions into the market, in a decade.
President Donald Trump, who called Fed policymakers “boneheads” for not cutting rates enough, yet again tore into Fed’s decision.
Jay Powell and the Federal Reserve Fail Again. No “guts,” no sense, no vision! A terrible communicator!
— Donald J. Trump (@realDonaldTrump) September 18, 2019
Major U.S. stock exchanges slipped after the decision to cut rates was announced.
However, they are back in the green. The Dow Jones Industrial Average is up 0.13% at 27,147.08 and S&P 500 is back above 3,000 which was at 2,981, a few hours back.
Gold price, however, edged lower — for the third consecutive day in a row — after the Fed delivered mixed signals about its next move.
Bitcoin is following gold as it dropped to $9,600. Currently, BTC/USD is trading at $9,879 with 24 hours loss of 3.26% as per Coincodex.
Deja Vu? Recession Fears rear Its Ugly Head Again
As cracks start forming in the financial markets, recession fears had risen.
A lot has been going already with US-China trade war, weakening data particularity in the manufacturing sector, slowing global economy, and an inverted yield curve.
The Fed Chair, however, maintained that there is no recession risk while forecasting continued growth.
Stock markets meanwhile, continued to make new highs in July that after correction in August ensured a rally into September. Then, the Fed made a rate cut.
The same scenario occurred more than a decade ago, before the recession. We had an inverted yield curve, slower US economic growth and yet S&P 500 made a new high in 2007 only to correct followed by Fed announces rate cut.
US stocks then proceeded to make another high and then the recession of 2008.
Although it doesn't mean that history would repeat itself or is any indication of what is to come, the warning signs can’t be ignored either.
Also, the Fed will continue to be in total denial until after the fact.
Powell September 6:
“We’re not forecasting or expecting a recession,” he said. “The most likely outlook is still moderate growth”
“Our main expectation is not at all that there will be a recession,” Powell said.”https://t.co/y9qq1jczvq
— Sven Henrich (@NorthmanTrader) September 16, 2019
To avoid the same results as the last time, markets need to make sustained highs.
Investors, however, need to look at other options as Ray Dalio of Bridgewater Associates said in July, find the “next-best currency or storehold of wealth” that isn’t controlled or devalued by central banks.
This is where Bitcoin becomes a valuable crypto asset.
“You will be forced into crypto, there is no choice, just a matter of when,”
said Changepeng Zhao, Binance CEO.