The fear in the market is palpable.
The trade war is only intensifying with no real signs of cooling prior to 2020.
President Trump just threatened to add another 10% tariff on $800 billion worth of Chinese imports by September 1, 2019. China retaliated by halting imports of U.S agricultural products.
Global bond yields plummeted to a low of 1.595% after starting August above 2%.
“A sharp decline in yields as the 10-year note falls under 1.65%. This is raising the ‘Fear Factor’ over the impact of the trade war on the economy,” Peter Cardillo, chief market economist at Spartan Capital Securities told MarketWatch.
That’s not the worst of it, though. For one, President Trump says the U.S. just isn’t ready to end the trade war dispute. Two, Morgan Stanley just made the case that a global recession will hit in the next nine months if we don’t see a near-term resolution. Three, China is threatening to weaponize its rare earth supply. Now comes news of unrest in Hong Kong.
So, it comes as no surprise that investors have been fearful of the market.
Herd instincts are kicking into overdrive over the trade war, and fears of a global recession.
While many investors are fleeing stocks, many are also heading toward the “safe havens” of cryptocurrencies. In fact, since the trade war flare-up began, Bitcoin has exploded from $7,000 to $11,177 on tumultuous fear.
"While the risk asset drawdown is still in its very early stages, Bitcoin is on the rise as these risks are just beginning to show up in other asset and currency prices. Since Trump first announced the tariff hike in May, Bitcoin has generated a cumulative return of 104.8% through August 7, versus an average of -0.5% for the twenty other asset classes, markets, and currencies below during the same period,” note analysts at Grayscale Investments, as quoted by CCN.
Analysts argue Bitcoin is a Sold Hedge Against Uncertainty
“Bitcoin has many use cases and one of the most important is as a form of digital gold,” Charles Hayter, CEO of Crypto Compare said, as quoted by CNBC. “We have seen bitcoin jump before on macro uncertainty as it becomes a conduit and flight-to-safety asset.”
"Bitcoin has the ability to act as a safe haven asset, and signs of a further deteriorating trade war with China could have been the primary catalyst to drive up bitcoin prices following Trump's tweet," said John Todaro, director at Trade Block, as quoted by Forbes.
Should the trade war continue to intensify, we could see higher highs for major coins.
By: Ian Cooper of Wellington & Co. Hedge Fund Research
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