Longer Recession Than Expected? - More Time To Accumulate Assets!

What a week is behind us! More economic data has hit the news as well as another Interest Rate Hike by the FED. Furthermore, it looks like crypto is holding its ground and then we have the mid-term elections around the corner. There is a lot going on these days and everything is covered under constant news off Elon Musk and his Twitter take-over. Well, in this article I want to specifically focus on the economic situation. I want to discuss the interest rates and why they might have to prepare for a longer recession than initially planned. Other than that, I want to talk with you about the upcoming elections as well as crypto’s role in the economic market at the moment. With that out of the way, let’s get started! 😊

New Interest Rate Hike

First things first, let’s talk about yet another interest rate hike. The FED raised the interest rate for another 75 basis points which means that borrowing money and mortgage rates for houses are getting even higher for the every day people. These news were initially expected and the market reacted very positive on the news with the hopes that this might be one of the last hikes to come. Well, this was quickly destroyed by the FED chairman himself, Jerome Powell. He assured everybody that this was certainly not the last hike and that there will be more to come. This crashed all markets including stocks as well as crypto.

To be honest, I did not expect anything other than that. If the inflation is still around 9% and the real interest rates are around 6% we are still looking at a negative absolute interest rate. This means that it is still beneficial to borrow money at the moment. I would have wished the FED would take a break from the hikes in order to look where their hikes have taken them as the influence of the hikes is a little bit delayed and its power will be seen throughout 2023 but I assume the FED will continue its very aggressive path.

On that note, we can already see that the lay-offs have began to increase and that the unemployment rate was higher than expected! This made the markets react positively again. What an absurd world we are living in, where negative news are provoking positive market reactions. I guess the big money people are expecting the FED to slow down if they are seeing the economy crashing and I think that they will be right at some point.

Upcoming Elections

Another very important topic will be the upcoming Mid-Term elections! At the moment the democrats are in power in all three important positions: they have the majority of the house, the senate and are providing the president. In the mid-term elections the distribution of power in the house and the senate is being determined again. This will be important.

If the Republicans are able to win over the senate and the house, president Joe Biden will have trouble to pass any new law, especially ones that require a lot of spending. On the one hand this will certainly be bad for people in need. On the other hand this will bring up the markets, as they will have certainty about the regulation situation as well as that there will be no more inflationary bills passed.

In total, I would say that there will always be losers and winners from these elections. I just hope that the amount of winners will be more in this case. All in all, a very tricky situation we are currently in.

Crypto’s Role At The Moment

Last but not least, I would like to talk about crypto’s role in this whole theatre of economy. It seems like Bitcoin and Ethereum are widely untouched by the whole volatility that is going around at the moment. It also seems like that these coins are very good hedges against the loss of the currency values in countries where the inflation is taking over. This just shows the importance of crypto, for especially countries that are somewhat dependent on the US Dollar.

On top of that, Ethereum is slowly becoming the holy grail for potential institutional investors. Since the merge to Proof of Stake it can be looked at as a ESG compliant form of investment. Therefore, I assume that once regulations are put in place, Ethereum will be one of the biggest coins that investors will be running towards. On top of that, there are several updates planned which are supposed to increase the scalability of this blockchain.

Not only that but even investors like Kevin O’Leary are advocating for the big two coins for anyone who is trying to get into the crypto space: According to him Bitcoin and Ethereum will be the two pillars of the next sector of the S&P 500. I would be more than happy if he is right with his prediction!

Conclusion

To conclude this article, I think that we will have a hard 2023 in front of us. But like I said in many of my previous blogs. This is exactly the time to position ourselves for the next bull run. I even think its better that this bear market could last longer than expected because it gives us as investors more time to accumulate the assets that we need. There will be a lot of winners after this recession is over and those will be the people who continued to follow their strategy and kept believing in the digital asset class. With hat being said, I wish you a great start to your week! 😊

Published by ga38jem on
LeoFinance
On 7th November 2022