The week got off to a complex start as traders began to weigh more heavily the implications of a new stimulus package and increasingly inflationary monetary policy. Bitcoin is once again on the rebound, just as the Dow Jones hits a fresh all-time high. Other investments, however, such as gold and tech stocks like the FAANG group—Facebook, Apple, Amazon, Netflix and Google—aren’t faring so well.
Most traditional markets reacted positively to expectations that a new stimulus package could provide support to prevent a market crash. During the Trump era, such policies served to keep markets afloat.
With this in mind, the Dollar Index (which measures relative currency strength globally) dawned its fourth consecutive green candle with a growth of 0.32%, marking a recovery from a nearly full-year decline. This is a sign that, in general terms, investors expect a positive performance out of the US economy in the near future, which would in turn help strengthen the dollar’s dominance over other fiat currencies.
The S&P 500 and the more conservative Dow Jones also benefited from trader optimism. The S&P 500 registered a 0.88% rise to 3,873 points, whereas the Dow recorded a 1.93% spike to 32,104 points—a new all-time high. It shows that at least these markets expect a positive week.
Traders move their money among different markets
Meanwhile, in cryptoland, Bitcoin managed to break the bearish correction it started at the end of February, a week after hitting an all-time high price of $56,000, and currently seems to be consolidating in the area slightly above $50,000.
At the moment, the price of Bitcoin is just below $52,000, respecting the trend line initiated exactly one week ago. The massive Bitcoin bull run that started in March of last year, heavily buoyed by a rush of institutional investment, appears to have some steam yet.
As expected, gold proved its negative correlation with speculative stocks and other investments. As investors become increasingly complacent about the future, gold's appeal as a store of value declines.
The price of gold has been in a clear bearish channel since August 2020. The reason may point to a shift of interest among investors. Bart Melek, head of commodity strategies at TD Securities, explained to Reuters today that the stimulus package—if the same scenario that played out in 2020 repeats itself—could result in a boost to the economy. As there is more money in circulation (due to inflation), bonds and other markets can benefit as investors seek for a long-term equilibrium. The sentiment shifts because traders could move their money in search for better returns.
"We have an economy that is recovering and inflation is materializing; that ultimately means yields have room to move higher," Melek told told Reuters, adding that gold could keep falling to around $1,660 per ounce.
The tech market also appears to be in a bearish mood. The Nasdaq 100 is down almost 1%, almost exactly the opposite of the Dow, S&P, and Bitcoin moves today.
The "Tech Stocks that Move the Market" (an index created by Yahoo with the most important and promising technology companies in the world of technology) also recorded a dip of 0.88%, inversely proportional to that of the S&P 500.
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