Author: Revc, Golden Finance
After Trump confirmed his return to the White House, the U.S. stock market and the crypto market experienced a week of continuous gains, but with the surge in U.S. bond yields and the strengthening of the U.S. dollar, the rise of U.S. stocks has slowed down. Investors' attention has gradually shifted from the "Trump deal" to the upcoming U.S. Consumer Price Index (21:30 p.m. Beijing time on Wednesday) report, which may determine the future monetary policy of the Federal Reserve. This CPI data also has an important impact on the crypto market and will determine the short-term trend of the market.
Analysis of volatility factors in U.S. stocks
Trump's victory has given investors hope for his tax cuts and deregulation policies, and this expectation has driven U.S. stocks up. But Morgan Stanley believes that this optimism has three major risks: rising U.S. bond yields, a stronger U.S. dollar and overvalued stocks. With rising U.S. bond yields, investors are worried that the Federal Reserve may maintain a higher interest rate policy, thereby weakening the momentum of the stock market. The market is not confident about the future rate cut process, and the high valuation of U.S. stocks makes investors worry about price bubbles, which may trigger a correction.
In addition, the strengthening of the US dollar is not good for the profits of multinational companies, further suppressing the trend of US stocks. If the US dollar continues to strengthen, it will put pressure on the S&P 500 index. The superposition of these factors may lead to an increase in investors' risk aversion demand, thereby pushing up US bond yields further and exacerbating market uncertainty.
The key impact of CPI data
The upcoming October CPI data is one of the key factors in determining the Fed's policy. The market expectsCPI to rise by 2.6% year-on-year in October, slightly higher than2.4% in September. If the actual data is higher than expected, the Fed may delay the pace of interest rate cuts, which will be bearish for the market. Fed official Kashkari hinted that if the CPI data exceeds expectations, it is very likely that interest rates will remain unchanged at the December meeting.
Linkage between U.S. stocks and crypto markets
On Tuesday, all three major U.S. stock indexes closed lower, with the S&P 500 ending a four-day winning streak. The Dow Jones Industrial Average fell 382.15 points (-0.86%) to 43,910.98, the Nasdaq Composite fell 17.36 points (-0.09%) to 19,281.40, and the S&P 500 fell 17.36 points (-0.29%) to 5,983.99. In terms of individual stocks, Nvidia rose 2%, Tesla fell 6%, and Trump Media Technology Group fell 8.8%.
After trying to reach the $90,000 mark, Bitcoin pulled back to around $86,000, and its price performance has become more correlated with traditional financial markets.
The development prospects of the crypto market are not only affected by the Fed's policies, but may also be affected by the collateral effects of future fluctuations in U.S. stocks. If the Fed delays rate cuts due to inflationary pressure, the crypto market will also be negatively affected by the reduction in liquidity in global financial markets. However, with the implementation of the Trump administration's crypto-friendly policies, the crypto market is expected to enhance the robustness of its fundamentals. In addition, small currencies and meme coins show high volatility in a market environment with strong liquidity. If market sentiment is positive, the crypto market may set off a wave of gains.
Summary
With the CPI data about to be released, factors such as rising interest rates and a stronger dollar facing US stocks may drive market fluctuations in the short term. Investors can seize the opportunity of linkage between the US stock market and the crypto market, but they also need to pay close attention to the adverse impact of CPI data on market sentiment.
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