- According to JPMorgan, the soaring price of Bitcoin could delay the Federal Reserve’s interest rate cut plans.
- The bank said any signs of frothiness in risk assets such as Bitcoin could lead to higher long-term interest rates.
- “Premature rate cuts risk causing asset prices to rise further and inflation to rise further,” JPMorgan said.
Would You like a feature Interview?
All Interviews are 100% FREE of Charge
Bitcoin’s record rally may prompt the Federal Reserve to postpone an interest rate cut planned for later this year, the newspaper reported. JP Morgan.
Strategist Marko Kolanovic said in a recent note. Bitcoin rose above $60,000, Combined with record highs in stock prices, this suggests that “foam” is starting to build up in risk assets.
The bubble could ultimately reignite inflation, potentially causing the Fed to postpone plans to cut interest rates, which often stimulate risk assets.
“This could keep monetary policy at a high level for an extended period of time, as a premature rate cut risks further rising asset prices and triggering further increases in inflation,” Kolanovic said.
The market now expects the Fed to cut rates at least three times in 2024, with the first rate cut coming in June, according to the CME FedWatch tool.
Much of the stock market’s rally since October has been driven by hopes for lower inflation and lower interest rates, and further delays in the Fed’s planned rate cuts could put a dent in the stock market’s bullish outlook. .
But Kolanovich said, paraphrasing recent comments by Fed Chairman Christopher Waller, “If disinflation is still perfect, then ‘what’s the rush?'”
Kolanovic remains bearish on stocks, arguing that there is little sign that investors are hedging risk and that the market is currently priced in for perfection.
“Equity trading volume is near its lowest level in years, with stocks being expensive (relative to bonds and cash), rich in assets, concentrated in mega-cap stocks, and overly reliant on the AI story. “We are worried given that the stock appears to be assuming zero potential for “growth risks (due to high levels),” Kolanovic said.
Kolanovic The target price for the S&P 500 is 4,200. This represents a potential downside of 18% from current levels.