[Part 1] Inflation Is At Record High, What Will Financial Markets Look Like In 2022

The economy continues to face many difficulties due to high inflation. Has there been a follow-up move from central banks amid new variables? In addition, the crypto market in the past week has also been affected quite a lot by the legislators. Find out with Coin98 Insights in the article below.

Core knowledge:

• High inflation made financial markets negative, and the Fed’s predictions about a 0.75% increase in interest rates were made.
• Oil prices are expected to continue at high levels and are unlikely to fall in the near future.

Current Financial Market Context

Record-High Inflation Causes Prices To Fluctuate

On the evening of June 09, the latest US inflation data was announced by the US Bureau of Labor Statistics. Accordingly, this index reached 8.6%, the highest since 1981 until now.

Many of the charts above can be seen that, when excluding energy and food, the inflation index tends to decrease. This shows that these are the two main indicators that push commodity prices to new highs.

Because it is 0.3% larger than the number predicted by many experts (8.3%), financial markets immediately reacted negatively. In the US stock market, at the end of the session on June 10, the main indexes all dropped from 2.5% to 3.5%. Technology stocks continued to come under strong selling pressure as the NASDAQ posted the biggest drop of any major US market index. 

Bitcoin accordingly has also seen a drop of more than 23% since the news of the inflation broke (in addition to inflation, the Celsius company event also caused the price to plummet).

Oil prices remain high as supply fails to keep up with demand due to economic sanctions directed toward Russia. Besides, OPEC did not increase production until July, which is also a reason why oil prices continue to climb.

Oil prices in the period of 2021 – 2022 are assessed by experts at Bloomberg to have many similarities compared to 2007 – 2009, but the scenario in 2022 is completely different when oil prices are not considered to drop sharply immediately. immediately, but continue to remain high in 2023.

Current energy prices are the main reason why inflation continues to soar. As a result, central banks will be under pressure to raise interest rates even faster to contain the status quo. 

Accordingly, the prediction of an interest rate increase after information on inflation has also changed.

Forecasts about the Fed’s June meeting a week ago showed that there is a 96.9% chance that the Fed will increase 0.5% and only 3.1% will increase 0.75%. Only one week later, this rate has completely reversed with 89.8% in favour of a 0.75% increase in interest rates in the upcoming meeting.

Therefore, the current decline of the financial market shows the move to re-evaluate the valuation in the context of tight cash flow and economic difficulties.  

Hot Issues In The Market

This is a period of great volatility for the financial market in general and crypto in particular. Accordingly, the most influential news and events are also quite a lot:

• Following in the footsteps of the Fed, the European Central Bank (ECB) will raise interest rates starting in July with an increase of 0.25%. This is a move to reduce inflationary pressure on the EU area.

• The war situation in Ukraine is still tense as the country continues to ask for more weapons (according to Vietnamnet). The war is still not over which is a bad sign for the economy.
• The Fed will give its official stance on inflation and interest rates at its meeting on June 15. In 2022, the Fed has 5 more meetings and there have been many predictions about interest rates up to 4% – 4.5% instead of 2.5% – 3% at the end of 2022.
• For China, an important variable affecting oil prices analyzed in the previous macroeconomic update, the country is gradually planning to reopen its economy. However, this effort is being hampered by the risk of outbreaks in Shanghai and Beijing (According to Bloomberg ). Therefore, the risk of a stronger oil price increase is still possible due to the effects of the reopening of China.

As for crypto, legislators continue to offer ways to control this market:

• The US Commodity Futures Trading Commission (CFTC) is being considered more “friendly” to its role of regulating the US crypto market than the US Securities and Exchange Commission (SEC). While there has been no official decision from the US Congress yet, we can hope for a future where the SEC has fewer bewildering lawsuits against crypto institutions.
• The SEC opened an investigation into Binance continuing on the grounds that the BNB token could be unregistered security on the basis of the ICO event that took place in 2017.
• Lawmakers in New York have introduced a bill to ban crypto-mining activities using carbon-based power.
• A bill aimed at regulating the crypto market towards US DAOs and DeFi platforms was leaked on June 7.
•  

Verdict

This is information about the current macroeconomic situation, and it has more or less impact on the financial market in general and the crypto market in particular. However, personally, the crypto market still has room to grow in the future, so macro shocks will be an opportunity for long-term investors to seize investment opportunities.

If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.

Marcus

Coincu Venture