The markets are green across all major assets, including stock markets, commodities and crypto. This is despite the rise of unemployment and economic slowdown. According to leading financial analysts, there are a number of factors at play which despite the facade of a bubble keeps pushing asset prices.
There is a lot of liquidity in the markets right now due to the surge of coronavirus stimulus money. Moreover, according to leading financial analyst from Fundstrat, Thomas Lee, a lot of money is sitting on the sidelines in the apprehension of the drop which could get in for bullish gains.
Pre and Post Coronavirus Levels
The S&P 500 index recently crossed the pre-coronavirus crash levels. The surge in Silver above $19.06 along with the long-term consolidation above equivalent levels in gold is technically bullish for all three assets.
This might smell of a bubble, Alex Kruger, an economist and trader cites the reasons for it,
– Negative real rates
– Continued monetary & fiscal stimuli
– Virus over-rated (market over-reacted)
– Economic recovery
Traders and analysts are constantly looking to hedge their capital against inflation and devaluation of the dollar.
Bad or Worse?
The downtrend and the exorbitant supply of the dollar are further acting as a catalyst for investment elsewhere. However, the slowdown in the economy is causing a setback in the rent and return-seeking abilities of small and medium scale businesses. Mati Greenspan, portfolio manager and founder of Quantum Economics tweeted,
…This concept on Wall Street is known as TINA. There is no alternative. It’s been a prime factor contributing to recent pumpamentals.
In the current environment with zero to negative return rates, the market can experience a “Tina Effect.” It continues to rise despite weak fundamentals due to the lack of options for investors. Traders are forced to take on risks, in such situations. The question for crypto traders is that will it continue to couple with asset gains or act as a complete outlier, falling against odds.