Financial
markets are seen to be stoned as the debt ceiling drama continues to hit the
stage. Even though such debt troubles regularly emerge and are always resolved
in the end without any serious shocks felt, this issue is still miraculously causing
investors to worry. Republicans and Democrats must come to a compromise to get
the bill to Congress during the week between June 1-8. Indeed, sometimes the
deadline is missed, like in 2011, but even then the market did not collapse.
This drama
led the prices of stocks and cryptos to a flatten as volatility decreased.
Meanwhile, investors are trying to guess how the market will move after the
debt ceiling issues are lifted from the agenda. Federal Reserve’s (Fed)
officials are signaling to the hike of interest rates. Sent-Louis Fed President,
James Bullard, suggested that interest rates should be hiked by 50 basis
points. Uncertainties always make speculations stronger. So, we may expect any
surprises in the market, including panic.
So, it will
be better for an investor to wait and see during this troubled period. This is particularly
true for risky instruments like stocks and cryptos. U.S. Treasuries yields are
rising as investors see a successful resolution of debt ceiling issues, low
recession chances, and rising interest rates. This sentiment in not favoring
risky asset investments. Risk appetite is muted, and this sentiment is unlikely
to change soon.
BTC prices
are running flat after hitting highs at $31,000 per coin. We forecast prices
are likely to go down towards $24,000 per coin, with a chance to dive further
down to $19,500. The major cryptocurrency has simply no fundamentals to go up,
while it has a lot of reasons to move down to follow the weakness of the stock
market.