InvestMacro

By JustMarkets

The US stock markets continued their rally yesterday. By Thursday’s close, the Dow Jones Index (US30) decreased by 0.11%, while the S&P 500 (US500) gained 1.48%. The NASDAQ Technology Index (US100) jumped by 3.25%.

Investors are investing in tech stocks after the Meta rally. The artificial intelligence technology boom in recent months has forced investors to pour money into technology. The market has also been helped by renewed confidence that the Federal Reserve will stop raising rates sooner than originally planned.

Tesla (TSLA) added another 3% to its recent rally after it was announced that the company would increase production at its Shanghai plant to nearly 20,000 vehicles per week. Apple’s (AAPL) results for the quarter fell short of estimates due to a drop in iPhone revenue. iPhone’s revenue fell about 8% to $65.78 billion amid a difficult macroeconomic environment and significant supply constraints. Apple stock fell by 3% after the report was released. Alphabet (GOOGL) reported lower-than-expected fourth-quarter earnings and revenue as lower spending on online advertising affected results. The company also said its first-quarter results would reflect lower spending related to job cuts. Shares of Alphabet Inc. fell more than 1% on the report. Amazon (AMZN) was also unhappy with the results.

Operating profits continued to fall in the current quarter. Faced with high inflation and a volatile economy, the company has set its sights on cutting costs across various businesses. Shares fell 5% after the market closed. Ford Motor Co (F) said Thursday that fourth-quarter profit fell from a year earlier. The automaker blamed supply chain problems and production “instability, ” leading to higher costs and lower volumes. Ford shares fell more than 6% on the report after the close of the main session.

Stock markets in Europe were mostly up yesterday. Germany’s DAX (DE30) gained 2.16%, France’s CAC 40 (FR40) added 1.26%, Spain’s IBEX 35 index (ES35) jumped by 1.45%, and Britain’s FTSE 100 (UK100) closed Thursday up by 0.76%.

The ECB, as expected, raised its interest rate by 0.5% yesterday. The US Fed is ending its rate hike cycle and will soon talk about ending quantitative easing (QT), with the ECB about halfway through and planning to start QT in March. This situation is good for the euro as the spread between the euro, and the dollar will continue to narrow.

The Bank of England announced another “sharp” interest rate hike on Thursday, saying it was too early to declare victory over inflation. The bank raised its key rate from 3.5% to 4%. Nevertheless, the bank tempered expectations of further rate hikes, dismissing suggestions that it would respond “strongly” to price pressures and implying that future changes would be smaller.

Oil prices fell Thursday as US factory orders fell and the dollar strengthened, making oil more expensive for non-US buyers. This indicates a further slowdown in the economy, especially in manufacturing, which is negatively affecting oil. Investors have become less confident about the strength of the oil outlook. But analysts are still confident in a bullish scenario for the “black gold” due to the rebounding economy of China (the largest oil importer). It is also worth remembering that the ban on Russian oil will come into effect on February 5, which may strike a blow to global supplies.

The unusually warm start to the winter of 2022/23 resulted in a significant reduction in heating demand in the United States and Europe compared to the norm, leaving more gas in storage than originally anticipated. This has led to a drop in natural gas prices over the past two months. But the situation may change dramatically with the onset of cold weather, which weather forecasters predict for the second half of February.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.20%, China’s FTSE China A50 (CHA50) decreased by 0.34%, Hong Kong’s Hang Sengv(HK50) lost 0.52%, India’s NIFTY 50 (IND50) fell by 0.03%, and Australia’s S&P/ASX 200 (AU200) was up by 0.13% on the day.

The mixed economic data released reinforced concerns about China’s rapid recovery after the repeal of the zero COVID-19 policy. While the country’s services sector recovered sharply in January after a four-month slump, a private survey showed that small-scale manufacturing firms still struggle with rising COVID-19 cases and lingering supply chain problems.

Severe flooding in New Zealand’s largest city, Auckland, has increased inflationary pressures and is creating a new cost-of-living headache for Prime Minister Chris Hipkins, who is trying to win back support for his party before the election.

S&P 500 (F) (US500) 4,179.76 +60.55 (+1.47%)

Dow Jones (US30) 34,053.94 −39.02 (−0.11%)

DAX (DE40) 15,509.19 +328.45 (+2.16%)

FTSE 100 (UK100) 7,820.16 +59.05 (+0.76%)

USD Index 101.74 +0.53 (+0.53%)

• – Eurozone Services PMI (m/m) at 11:00 (GMT+2);
• – UK Services PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Retail Sales (m/m) at 12:00 (GMT+2);
• – Eurozone Producer Price Index (m/m) at 12:00 (GMT+2);
• – US Nonfarm Payrolls (m/m) at 15:30 (GMT+2);
• – US Unemployment Rate (m/m) at 15:30 (GMT+2);
• – US ISM Services PMI (m/m) at 17:00 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By William Chittenden, Texas State University 

The Federal Reserve’s policy-setting committee lifted interest rates on Feb. 1, 2023, by a quarter of a percentage point to a range of 4.5% to 4.75%. The increase, the smallest since the Fed began an aggressive campaign of rate hikes in March 2022, came amid signs the fastest pace of inflation in decades is cooling. But the Fed also indicated more rate hikes are coming.

So why is the Fed slowing the size of rate increases now, and what does it mean for consumers? We asked finance scholar William Chittenden from Texas State University to explain what’s going on and what comes next.

Why did the Fed raise rates by only a quarter point?

The Fed is trying to figure out whether last year’s rate hikes have slowed the economy enough to get inflation near its target of about 2%.

By raising what’s known as the Fed funds rate, the U.S. central bank makes borrowing more expensive, which means buying large-ticket items, like cars and homes, is more costly. This should lead to fewer people buying cars, which will likely result in lower car prices.

In 2022, the Fed lifted rates eight times by a total of 4.25 percentage points, which helped prompt inflation to drop to an annual pace of 6.5% in December from 9.1% at its peak in June.

To understand why it’s so hard for the Fed to figure out if its rate hikes worked, think of the economy as a fully loaded oil tanker out in the ocean. Naturally, it’s chugging along as fast it can to reach a specific destination, but it takes a long time from the captain “stepping on the brakes” to when the ship actually stops moving forward.

Similarly, the Fed is raising rates to slow the economy – sort of like stepping on the brakes – and bring inflation down to 2%, but there’s often a long delay between the hikes and their impact on the economy.

But if the Fed eases off the brakes too early, inflation could remain high. If it presses on them too hard, unemployment will likely shoot up and the economy will slide into a recession. By increasing interest rates only a quarter-point, the Fed is signaling that it believes the economy has begun to slow down and is on a path to 2% inflation.

Does this mean borrowing costs will start coming down?

The Fed funds rate acts as a base rate for shorter-term interest rates, such as for car loans and credit cards. As it goes up, short-term borrowing rates increase by about the same amount.

The financial markets are predicting about an 80% chance the Fed’s benchmark lending rate will top out around 5% this summer – which means they’re expecting rates to go just a little bit higher.

Rates on shorter-term borrowing are unlikely to come down, but if markets are right, they probably won’t increase much more.

However, for long-term borrowing costs, as on a 30-year mortgage, rates are already coming down and are likely to fall some more – good news for homebuyers.

How about inflation – can consumers expect prices to start falling?

Overall, yes, inflation is already starting to come down – and prices on some items are even falling.

For example, used-car prices, which soared earlier in the COVID-19 pandemic, have dropped in recent months, while prices of dozens of other items, such as flour, clothes and gasoline, have eased.

However, some costs continue to increase. Egg prices soared after the supply was disrupted because of avian flu, which killed off nearly 53 million egg-laying hens. Unfortunately, increasing interest rates will not bring back those birds or help decrease the cost of eggs.

In addition, nothing the Fed does will affect the war in Ukraine, which has led to higher world wheat and energy prices.

The point being, the Fed can’t really address certain types of inflation.

Does all this mean the U.S. will avoid recession?

That’s the trillion-dollar question.

Fed officials have at times sounded hopeful that they can bring down inflation without crashing the economy – a so-called soft landing. During his press conference after the latest announcement Feb. 1, 2023, Fed Chair Jerome Powell was more cautious, saying it’s too soon to declare victory. But he noted: “We can now say for the first time that the disinflationary process has started.”

Economic forecasters have been less confident that the U.S. will avoid a recession. On average, economists surveyed this past month by The Wall Street Journal forecast a 61% probability of a recession in 2023. In addition, key economic indicators point to a recession, while the yield curve – a bond market metric that has been successful at predicting recessions – currently puts the odds at about 47%.

In my view, this all adds up to: Nobody really knows. My best advice to consumers out there is to prepare financially for a recession, but let’s not give up hope that the Fed can slow the economy without crashing it.

About the Author:

William Chittenden, Associate Professor of Finance, Texas State University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

By JustMarkets

The US stock markets rose yesterday amid a slowdown in the rate hike. At the close of the stock market on Wednesday, the Dow Jones Index (US30) gained 0.02%, and the S&P 500 Index (US500) added 1.05%. The NASDAQ Technology Index (US100) jumped by 2.00% yesterday.

The Federal Reserve raised its interest rate by 0.25% on Wednesday but indicated that it expects more hikes in the future. The Fed is planning two more 0.25% rate hikes in March and May, but analysts doubt the Fed needs to go that high, especially since inflation is slowing and there are early warning signs in the labor market. But investors were generally encouraged by Powell’s answers to questions during his press conference about easing financial conditions, such as the rebound in stocks and falling bond yields in recent months. That pushed stock indices higher.

Meta Platforms stock jumped by 17% thanks to fourth-quarter revenue outperformance. Revenue was $32.17 billion, better than the consensus forecast of $31.53 billion. Facebook reached the milestone of 2 billion daily active users. Major tech companies like Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) report today. Volatility in the stock market will be high, especially during the reporting period.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.35%, French CAC 40 (FR40) decreased by 0.08%, Spanish IBEX 35 (ES35) added 0.74%, British FTSE 100 (UK100) closed on Wednesday down by 0.14%.

The ECB and the Bank of England will hold their monetary policy meetings today. In both cases, an interest rate hike of 0.5% is expected. This may give confidence to the euro and the British pound amid a narrowing interest rate differential with the US Fed. With the British economy already projected to fall into recession in 2023, Governor Andrew Bailey and his colleagues should assess how much of a delayed negative impact a further series of rate hikes will have. Public employee strikes have heightened the sense of despair in the economy.

Gold reached the $1,950 mark as the dollar fell because the US Federal Reserve nears the end of its tightening cycle. Gold has an inverse correlation to the dollar index and government bond yields.

The US crude oil inventories hit a 20-month-high. With OPEC+ countries deciding to leave production levels unchanged in the expectation that Chinese demand will pick up, oil prices fell more than 3% yesterday. But the long-term outlook for oil remains bullish.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.07%, China’s FTSE China A50 (CHA50) jumped by 0.66%, Hong Kong’s Hang Seng (HK50) ended the day up by 1.05%, India’s NIFTY 50 (IND50) decreased by 0.26%, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.33%.

Bank of Japan spokesman Wakatabe said yesterday that the Bank of Japan’s resolve to continue monetary policy easing has not changed. But investors should understand that the Bank of Japan is likely to start the process of monetary policy normalization this year after the change of BoJ governor. Although some analysts believe that Japan’s central bank is unlikely to tighten monetary policy until deflation is defeated and the Ministry of Finance stops relying on ultra-low yields to control the cost of government debt. And that could take a much longer time.

S&P 500 (F) (US500) 4,119.21 +42.61 (+1.05%)

Dow Jones (US30) 34,092.96 +6.92 (+0.020%)

DAX (DE40) 15,180.74 +52.47 (+0.35%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.14%)

USD Index 102.06 −0.22 (−0.21%)

• – UK BoE Inflation Report at 14:00 (GMT+2);
• – UK BoE Interest Rate Decision at 14:00 (GMT+2);
• – UK BoE Monetary Policy Statement at 14:00 (GMT+2);
• – Eurozone ECB Monetary Policy Statement at 15:15 (GMT+2);
• – Eurozone ECB Interest Rate Decision at 15:15 (GMT+2);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+2);
• – Eurozone ECB Press Conference at 15:45 (GMT+2);
• – Eurozone ECB President Lagarde Speaks at 17:15 (GMT+2);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By JustMarkets

The US stock markets rose yesterday. At the close of the stock market on Tuesday, the Dow Jones Index (US30) gained 1.09%, and the S&P 500 Index (US500) added 1.46%. NASDAQ Technology Index (US100) jumped by 1.67%. Investors have been evaluating a lot of companies’ results, and they have generally been better than expected. But US economic indicators continue to decline. Consumer confidence fell from 109 to 107.1 in January, with the report indicating that consumers have become less optimistic about job prospects and expect a softening of business conditions in the near future.

General Motors (GM) shares rose more than 7% after its fourth-quarter results beat Wall Street estimates, and the automaker’s annual outlook was less bad than feared. Caterpillar (CAT) shares fell more than 3% after the heavy equipment maker’s fourth-quarter earnings missed Wall Street estimates. PayPal (PYPL) announced plans to lay off 2,000 employees, about 7% of its workforce, as the payments company prepares for a “challenging macroeconomic environment.”

Investors await further results from the big tech companies. Meta Platforms (META) will report as early as today. And on Thursday, Alphabet (GOOGL), Apple (AAPL), and Amazon.com (AMZN) will report.

The US Federal Reserve will hold an important monetary policy meeting today. The Fed is likely to raise the rate by 0.25%, and that increase is already in prices. Therefore, investors’ main focus will be on Fed Chairman Jerome Powell’s speech 30 minutes after the rate release. Investors will be looking for clues as to the Fed’s next move — whether the Fed will continue to raise rates or this hike will mark the end of the tightening cycle, after which the central bank will take a long pause.

Equity markets in Europe traded flat yesterday. German DAX (DE30) gained 0.01%, French CAC 40 (FR40) closed on the opening level, Spanish IBEX 35 (ES35) decreased by 0.19%, and British FTSE 100 (UK100) closed on Tuesday down by 0.17%.

Despite the energy crisis and the ensuing inflationary crisis, the eurozone economy once again showed resilience. Eurozone GDP grew by 0.1% in the last quarter. But most economies are now in stagnation with near zero growth. Germany and Italy, as the major industrialized countries, have seen small declines as they are hit the hardest by the energy crisis, while France and Spain have managed to achieve small growth rates. Despite the small increase, the growth momentum is downward, and the next quarter is likely to show a contraction.

The British Retail Consortium said that store price inflation accelerated to 8%, the highest since  2005. Prices for consumers have been rising steadily, even as the broader UK inflation rate is beginning to decline. Higher food prices mean that consumers are spending less on secondary goods.

The United States has expanded its sanctions list against Iranian entities that Washington accuses of being involved in supplying drones to Russia.

Natural gas prices continue to fall and have reached a 21-month low. The drop in gas prices came after an unusually warm start to the winter of 2022/23, which led to a drop in demand for heating fuel. But significantly colder temperatures are forecast for the region ahead, which will lead to increased consumption. In turn, increased consumption (demand growth) will put upward pressure on the quotes.

A weaker dollar and increased demand for crude oil and refined products, as reported late by the EIA or Energy Information Administration, supported oil prices yesterday. There will also be an OPEC+ meeting today where production quotas for the next two months will be approved. No surprises are expected, and production is projected to remain on target. However, volatility in oil will be elevated amid the release of strategic reserves data.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.39%, China’s FTSE China A50 (CHA50) lost 1.27%, Hong Kong’s Hang Seng (HK50) ended the day down by 1.03%, India’s NIFTY 50 (IND50) gained 0.07%, and Australia’s S&P/ASX 200 (AU200) ended the day down by 0.07%.

Factory activity in Japan has been decreasing for the third month in a row. Amid worsening global economic conditions, Japanese companies are facing calls for higher wage increases to counter inflation and support the recovery of the world’s third-largest economy.

New Zealand’s labor market is starting to show signs of slowing. The unemployment rate rose from 3.3% to 3.4%, with quarterly job growth falling short of forecasts. Against this backdrop, the central bank may slow the pace of interest rate hikes.

S&P 500 (F) (US500) 4,076.60 +58.83 (+1.46%)

Dow Jones (US30) 34,086.04 +368.95 (+1.09%)

DAX (DE40) 15,128.27 +2.19 (+0.014%)

FTSE 100 (UK100) 7,771.70 −13.17 (−0.17%)

USD Index 102.06 −0.22 (−0.21%)

• – Japan Manufacturing PMI (m/m) at 02:00 (GMT+2);
• – Spanish Manufacturing PMI (m/m) at 10:15 (GMT+2);
• – Switzerland Manufacturing PMI (m/m) at 10:30 (GMT+2);
• – Italian Manufacturing PMI (m/m) at 10:45 (GMT+2);
• – French Manufacturing PMI (m/m) at 10:50 (GMT+2);
• – German Manufacturing PMI (m/m) at 10:55 (GMT+2);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+2);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+2);
• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2);
• – Eurozone Consumer Price Index (m/m) at 12:00  (GMT+2);
• – OPEC+ Meeting at 13:00 (GMT+2);
• – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+2);
• – US JOLTs Job Openings (m/m) at 17:00 (GMT+2);
• – US ISM Manufacturing PMI (m/m) at 17:00 (GMT+2);
• – US Crude Oil Reserves (w/w) at 17:30 (GMT+2);
• – US FOMC Statement at 21:00 (GMT+2);
• – US Fed Interest Rate Decision at 21:00 (GMT+2);
• – US FOMC Press Conference at 21:30 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By ForexTime

Article by ForexTime

ForexTime Ltd (FXTM) is an award winning international online forex broker regulated by CySEC 185/12 www.forextime.com

By JustMarkets

The new week started with a more cautious mood in the markets. Stock indices closed lower on Monday as investors refused to buy stocks ahead of the Federal Reserve’s decision and further quarterly earnings. At Monday’s close, the Dow Jones Index (US30) decreased by 0.77%, and the S&P 500 Index (US500) lost 1.30%. The NASDAQ Technology Index (US100) fell by 1.96% yesterday.

According to analysts, the 25 basis point increase has already been accounted for by the market. The Federal Reserve is looking to slow its campaign against inflation but will signal further tightening. Officials note that unjustified easing will make it harder for them to restore price stability. Economists believe rising mortgage rates are cooling the housing market, and higher lending rates could make corporate investments more expensive. A stronger dollar hurts manufacturing by making exports more expensive and imports cheaper. And lower stock and bond prices can help curb consumer spending.

Stock markets in Europe mostly fell yesterday. Germany’s DAX (DE30) decreased by 0.16%, France’s CAC 40 (FR40) lost 0.21%, Spain’s IBEX 35 (ES35) fell by 0.12%, and the British FTSE 100 (UK100) closed up by 0.25% on Monday.

Unexpected data were published yesterday in Spain and Germany. Spain’s harmonized consumer price index rose from 5.7% to 5.8% year-over-year, with a forecast of 4.9%. A rebound in fuel prices drove the result. The core inflation rate rose to a record 7.5% year-over-year, reinforcing fears of tighter price pressures. In Germany, fears of a recession returned. Preliminary GDP data showed that the economy shrank by 0.2% quarterly after rising by 0.5% in the third quarter. Annual GDP growth for 2022 was also revised downward to 1.8% from 1.9% year-over-year.

The flurry of recent data showing that Europe’s economy is starting to grow again has even raised hopes that the Eurozone will avoid a sharp recession. But ECB President Christine Lagarde has repeatedly stressed that rates will continue to rise at a steady pace, and the ECB is expected to raise rates by 50 basis points on Thursday. Most analysts also expect a 50 basis point hike in March, but as inflation begins to decline and GDP in key eurozone economies shrink, there are already signs of a debate among policymakers that the pace should slow down. The focus will be on Lagarde’s comments after the rate decision is announced to hint at the future direction.

In Switzerland, the KOF economic barometer rose for the second month in a row. Nevertheless, the indicator remains below its medium-term value. But the outlook for the Swiss economy at the start of the year is much less bleak than it was last fall. The sectors that are recovering the fastest are manufacturing, hospitality, and services.

Oil fell by 2% yesterday. It became known that Moscow would not adhere to the Russian oil price cap set by the West. The administration of President Vladimir Putin is allowing Russian oil companies to sell as many barrels of oil as they want at whatever price they can get. There is a huge discrepancy between the Russian government’s policy and actual activity in the physical oil market. Russia is trying to negotiate with OPEC+ countries to maintain price stability and to maintain higher oil prices. Much will depend on whether OPEC+ leaves production levels at current levels.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.19%, China’s FTSE China A50 (CHA50) added 0.76% after the holiday, Hong Kong’s Hang Seng (HK50) fell by 2.73%, India’s NIFTY 50 (IND50) gained 0.25%, and Australia’s S&P/ASX 200 (AU200) ended the day 0.16% negative.

Kuroda’s ten-year tenure at the helm of Japan’s central bank comes to an end in April. Prime Minister. Kishida indicated last week that he would choose a new governor in February. Most Bank of Japan observers surveyed by Bloomberg see current deputy governor Masayoshi Amamiya or his predecessor Hiroshi Nakaso as the most likely successors. In the latest Bloomberg poll of Bank of Japan observers, Amamiya was the favorite to replace Kuroda, with 25 votes out of 37 responses.

China’s business activity index rose for the first time in four months as the economic recovery from Covid Zero continues and the Lunar New Year holiday boosted travel and spending. The pace of activity recovery remains in focus, and one positive sign is that more than 300 million trips were made during the Lunar New Year, nearly 90% of pre-pandemic levels.

S&P 500 (F) (US500) 4,017.77 −52.79 (−1.30%)

Dow Jones (US30) 33,717.09 −260.99 (−0.77%)

DAX (DE40) 15,126.08 −23.95 (−0.16%)

FTSE 100 (UK100) 7,784.87 +19.72 (+0.25%)

USD Index 102.23 +0.30 (+0.30%)

• – Japan Unemployment Rate (m/m) at 01:30 (GMT+2);
• – Japan Retail Sales at 01:50 (GMT+2);
• – Japan Industrial Production (m/m) at 01:50 (GMT+2);
• – Australia Retail Sales (m/m) at 02:30 (GMT+2);
• – China Manufacturing PMI (m/m) at 03:30 (GMT+2);
• – China Non-Manufacturing PMI (m/m) at 03:30 (GMT+2);
• – French GDP (q/q) at 08:30 (GMT+2);
• – German Retail Sales (m/m) at 09:00 (GMT+2);
• – French Consumer Price Index (m/m) at 09:45 (GMT+2);
• – German Unemployment Rate (m/m) at 10:55 (GMT+2);
• – Eurozone GDP (q/q) at 12:00 (GMT+2);
• – German Consumer Price Index (m/m) at 15:00 (GMT+2);
• – Canada GDP (q/q) at 15:30 (GMT+2);
• – US Chicago PMI (m/m) at 16:45 (GMT+2);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+2);
• – New Zealand Unemployment Rate (q/q) at 23:45 (GMT+2).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.

By George Prior

Eight out of 10 high net worth (HNW) individuals have asked their financial advisers about including cryptocurrencies, such as Bitcoin, into their portfolios over the last 12 months – despite the market experiencing a difficult year in 2022.

According to the results of a study by deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organizations, 82% of clients with between £1m and £5m of investable assets sought advice on cryptocurrencies.

Nigel Green, the CEO and founder of deVere Group, notes: “In 2022, the crypto market delivered its worst performance since 2018, with Bitcoin, the headline-grabbing market leader, falling about 75% during the year.

“The price drops came as investors reduced their exposure to risk-on assets, including stocks and crypto, due to heightened concerns about inflation and slower economic growth.

“Yet against this backdrop of the so-called ‘crypto winter’, HNWs were consistently seeking advice from their financial advisers about including digital currencies into their portfolios.”

He continues: “Interestingly, this typically more conservative group were not deterred by the bear market and adverse market conditions.  Instead, they were looking to either start including or increasing their exposure to crypto.

“This suggests that these high-net-worth clients are increasingly aware of the inherent characteristics of cryptocurrencies like Bitcoin which has the core values of being digital, global, borderless, decentralized and tamper-proof.

“Wealthy investors understand that digital currencies are the future of money, and they don’t want to be left in the past.”

Many of these HNWs who were polled will also have seen a consistent surge in interest being expressed by institutional investors, including Wall Street giants, who bring further capital, influence and confidence to the sector.

In recent months, JPMorgan, like many other major legacy financial institutions, including Fidelity, BlackRock and New York Bank Mellon, have also begun to offer crypto-related services to their clients.

The deVere CEO believes that this momentum of interest is set to build further as the ‘crypto winter’ of 2022 is thawing.

“Bitcoin is on track for its best January since 2013 based on hopes that inflation has peaked, monetary policies become more favourable, and the various crypto-sector crises including high-profile bankruptcies are now in the rear-view mirror,” he says.
“The world’s largest cryptocurrency is up over 40% since the turn of the year and this will not go unnoticed by HNW clients and others who want to build wealth for the future.”

Nigel Green concludes: “If HNWs were expressing such huge interest in the 2022 bear market, as market conditions steadily improve, they’re going to be amongst the first to capitalise in the forthcoming bull run.”

About:

deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients.  It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.