US Fed Playing With Fire – Bubbles May Burst While Bond Yields & Metals Rally

By FX Empire | FX Empire | 13 Jan 2022


The US Federal Reserve’s tightening monetary policy from a historically low-interest rate has slowed the US stock markets.

As a result, traders quickly attempt to adjust their capital allocation levels as risk assets, technology, and US major indexes roll lower because of expected Fed Rate Hikes and other Hawkish activities.

We will explore how the US Fed’s comments and potential future actions may prompt significant market trends in 2022 and beyond. We’ll also attempt to identify how and when the US Fed may disrupt the US markets. We know the actions of the US Fed will prompt some significant trends over the next 12 to 24 months. We know certain assets will likely rise in value as fear settles into the markets because of rising interest rates and deflating asset bubbles. It is just a matter of understanding how the speculative asset bubble of the past 8+ years and how the US Fed may move to pop these speculative bubbles soon.

 

 

Asset Bubbles Everywhere, The Global Markets Continue To Froth

Asset bubbles, such as those created in Cryptos, the US stock market, US Real Estate, and the art/collectible market over the past 5+ years, have visualized the US Fed’s easy money results in terms of bubbles.

Take a look at this chart showing the growth in certain asset classes since the start of 2019. It is incredible to think that these asset classes have rallied so far and so fast in just over 35 months:

  • The Grayscale Bitcoin ETF rallied more than 1200%.
  • The Technology sector rallied more than 200%. Real Estate rallied more than 85%.
  • The S&P 500 rallied more than 94%.

The US Federal Reserve’s move to lower interest rates after the 2018 market collapse, which resulted in a December 24, 2018, Christmas Bottom, prompted an incredible rally phase where traders followed the US Fed in piling into assets. As long as the US Fed continued buying assets and kept interest rates near zero, global traders had no reason to fight the US Fed.

 

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