Hawkish Fed, stocks market rally, and crypto falling behind

Why the US Stock Market Rally?

Macro Markets, presented by crypto analyst Marcel Pechman, is broadcast every Friday on the Cointelegraph Markets & Research YouTube channel. It aims to explain complicated topics in simple terms, focusing on how traditional financial events influence crypto activities on a daily basis.

Episode 13 of Cointelegraph’s Macro Markets starts by analyzing why the most recent action of the U.S. Federal Reserve has been linked to the surge in the stock market. According to Cointelegraph analyst Marcel Pechman, part of the market was skeptical that the Fed would keep interest rates above 5% for the rest of 2023 as the threat of an economic recession grows, but it appears they were wrong.

Pechman has indicated that the US government has shown that it is not concerned about the possibility of unemployment and lower corporate profits, so long as inflation is kept in check. This being the case, the most plausible explanations for the US stock market rally could be the fear of the Federal Reserve increasing interest rates, which did not happen, and the recent macroeconomic data, which revealed a 4% inflation rate and 1.6% growth in retail sales.

Pechman has stated that the crypto regulatory climate is not favorable, and the two main threats to the U.S. dollar have been eliminated: the debt ceiling and runaway inflation. Therefore, with the weak real estate market, investors seem to be making a wise choice by investing in the stock market in the upcoming months.

The ECB and Credit Default Swaps

Pechman realized that the ECB has not been as aggressive as the U.S. Federal Reserve in raising interest rates, and is now attempting to make up ground with its 3.5% base rate, which has been increased for the eighth consecutive time.

Pechman elucidates the workings of credit default swaps and the divergence in the risk levels between the U.S. and Europe as perceived by the markets. His inference is that the U.S. dollar may retain its predominant reserve status for a longer period than anticipated. Unfortunately, the prospects for the euro are bleak, as the region has already experienced two consecutive quarters of economic decline, putting it in a technical recession.

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