What Stagflation? Bullard being Bullard, bitcoin rallies

Equity traders are looking at surging global bond yields and are saying, “What, me worry?” The global bond market selloff is not easing at all and that should raise some red flags.  Mad Magazine’s Alfred E. Neuman is what many stock traders are starting to look like when they buy every dip.  Fed policy is about to become restrictive and commodity market tightness will still remain even if there is a quick resolution to the crisis in Ukraine. The bar is set high for the NATO summit to produce some coordinated effort that could bring us closer to an end to this war.

It seems whatever economic weakness that is starting to arise is being shrugged off as hope grows that Russia has lost momentum in the war in Ukraine.  Russian troops are not progressing deeper into Ukraine and Russia’s oligarchs and billionaires may find the upcoming round of sanctions from the US and EU to pose a great risk for their wealth.  The impact from this war is anyone’s guess, but what we do know is that the longer it lasts, the greater the stagflation risk will be for the global economy.

More from the Fed

Fed’s Bullard reiterated that the Fed needs to move aggressively to get to a neutral rate.  He added that they can’t wait for geopolitical tensions to ease and that they should get going on the balance sheet runoff. After yesterday’s hawkish encore performance by Fed Chair Powell and another round of Fed’s Bullard, it looks like Wall Street is mostly convinced that the Fed will raise rates by a half point and announce the balance sheet runoff at the next policy meeting in May. Normally Bullard’s expectations for Fed policy is the most aggressive, but it seems he may be spot on for the May meeting.

Bitcoin

Bitcoin is a risky asset and is enjoying the green across Wall Street.  Risk appetite is here as economic/military pressure grows on Russia, which raises prospects this won’t be a long war, Nike gave a strong outlook, and as surging Treasury yields have yet to deter investor appetite for risk.

Crypto headlines were limited but did include ECB’s Panetta comment that said they need to be mindful of increased threat of cyberattacks and that crypto assets must not become a sanctions loophole.  Bitcoin is once again nearing the upper boundaries of its USD 37,000 to USD 45,000 zone, but still doesn’t have a clear catalyst to break it.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya