Stock markets, Bitcoin, euro … “The crash is justified by the economic downturn and the war in Ukraine”

As we announced in the same column last fall and confirmed in our annual forecasts at the beginning of 2022, 2022 is certainly the year of the end of the fiscal excess and the return to reality. Indeed, after the first warning was issued in January last year as a result of the confirmation of sustained high inflation, the first phase of rising bond rates, and the second storm at the beginning of the war in Ukraine, finance. The market is entering a new stage. Severe correction. And this is especially in the stock market, euro / dollar and cryptocurrencies. The numbers speak for themselves: Bitcoin plummeted by 30% in 17 days. Since November 2021, it has decreased by 57.9%, reaching the lowest level since December 2020.

ACDEFI (Source: Bitfinex, ACDEFI)

Other cryptocurrencies are not excluded: -60% of Ethereum since November 2021, -79% of XRP since April 2021, -84% of Litecoin since May 2021, 2021 89% of the doge since May … Staying stable against the dollar has lost value in the last few days. Obviously, the shower is cold for those who think cryptocurrencies are a “safe haven”. But they can’t say we didn’t warn them …

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This descent to hell has also caused a particularly catastrophic storm for growth stock’s flagship index, in this case Nasdaq. Therefore, in six days, the Nasdaq Composite fell 12.3%. Since November 2021, it has plummeted by 29.2%, reaching the lowest level since November 2020.

ACDEFI (Source: Nasdaq, ACDEFI)

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For the more traditional stock market index, a sharp decline is also on the agenda. Between the early January 2022 peak and the lowest in the last few days, the S & P 500 fell 18.1%, the Dow Jones 13.8% and the CAC 40 fell 17.9%. In addition to being justified by the logical correction movement after the excessive surge in 2021 and the continuation of the war in Ukraine, these serious dips are also supported by economic statistics over the past few days. ..

Therefore, in China, following the national blockade, the Caixin Manufacturing Management Index in April fell well below the 50 mark, which marks the boundary between growth and decline in activity. This is 46.0 for industry, 36.2 for services, and 37.2 for all. Sector. This confirms that the Chinese economy is on the verge of recession. However, this disappointment did not prevent the Middle Kingdom from breaking records one after another in terms of trade balance. Therefore, China’s trade surplus in April reached $ 51.12 billion in a month and a record high of $ 743.93 billion in a year.

ACDEFI (Source: NBSC, ACDEFI)

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It emphasizes that the sustained stagnation of the Chinese economy will have a major impact on the supply of many countries around the world, exacerbating shortages and thereby exacerbating inflationary pressures. In this regard, it should be noted that the annual fluctuations in US consumer prices remained very high in April, despite the strong dollar leading to lower import inflation. Therefore, it reached 8.3% from 8.5% in March and has been at its peak since December 1981.

Inflation, excluding energy and food, also fell 0.2 points in April, but has remained at the upper limit of 6.3% since August 1982. The key consumer price indicator also fell 0.2 points in April, but remains very high at 11.0%. This ongoing tension in producer prices indicates that year-over-year consumer prices could rise further in the coming months or at best stabilize at high levels.

In other words, the Federal Reserve needs to raise its key interest rate by at least one point to 2% by the end of this summer. But as long as the ECB continues to deny reality and refuses to respond quickly and on a large scale to inflation surges, FRB’s money market spreads will widen further.

A development that clearly does not fail to depreciate the euro / dollar a little more. The latter has fallen to $ 1.0379, the lowest since January 2, 2003. As I explained in last week’s column, this euro / dollar depreciation is largely justified, but it is still beginning to pose a danger to stability and reliability. Economic and monetary union.

ACDEFI (Source: ECB, ACDEFI)

Indeed, the more the euro depreciates, the more angry inflation in the EMU (editor’s note as the cost of imports rises mechanically), disrupting household purchasing power and associated economic growth. But this is clearly incomprehensible to the ECB and probably prefers to wait for a reaction in July. That’s amazing?

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Mark Tuati, Economist, President of ACDEFI

His new book RESET-What is the new world for tomorrow? Has surpassed best-selling budget essays since its release on September 2, 2020

Mark Tuati

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