Expectations that the Fed would end the interest rate hike cycle after its May rate hike decision (25 basis points expected) triggered rallies in risky assets as of March.
With the rise in the US stock markets, Bitcoin also rose as high as $31,000. This expectation was triggered by the onset of the bank crisis in March. In a post we made at that time, we drew attention to the rise in Bitcoin in the previous periods when the FED kept the interest rates constant.
While previous data signaled that the rise in Bitcoin and risky assets may accelerate in the period after June, when the FED is expected to keep interest rates constant, expectations for 2023 rose.
BOA Enters Patient Bear Mode
In its latest investor note, Bank Of America analysts recommended taking a short (sell) position in stocks amid the threat of an impending recession.
BOA analysts stated that the rally in stocks was driven by US funds and fear of a possible recession could reverse these entries. The highlights of BOA's investor note are as follows:
“US funds led the stock rally in the rises until April 12.
While US funds saw an increase of $ 4.9 billion, $ 3.9 billion of this went into global equity funds.
There was an outflow of 1.1 billion dollars in European funds.
Cash funds saw an inflow of $51.6 billion, while $2.3 billion entered global bonds.
We continue to hold our position as "patient bears" as investors have to choose between lower interest rates and the possibility of a recession.
We sell the S&P 500 between 4100 and 4200. (currently 4146)
Our asset allocation recommendations. Long gold, commodities, small-capital industrial companies and banks; Short dollars, stocks, big equity companies and technology companies"
It is worth remembering that Bank of America's negative comments above are related to stocks. The report did not include a note specific to Bitcoin. However, considering that Bitcoin has increased its correlation with gold recently, if the expectations in this report come true, Bitcoin may be among the beneficiaries of this.
Bitcoin increased its correlation with the gold and commodities group in 2023, deteriorating its correlation with the Nasdaq and S&P 500 relatively. If we include Bitcoin in the commodity group, Bitcoin may also be a safe haven against the risk of a possible recession in light of BOA's assessments.