‘Forget a pivot’ – markets won’t see a boost from Fed rate cut in 2023, analyst says
‘Forget a pivot’ – markets won’t see a boost from Fed rate cut in 2023, analyst says
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Bitcoin (BTC) and other bulls will not benefit from a major change in US inflation policy in 2023, an analyst says.
in one Twitter thread On December 20, Jim Bianco, head of institutional research firm Bianco Research, said the Federal Reserve would not raise interest rates next year.
Bianco: Japan YCC move ‘affects all markets’
Analysts have turned all the more pessimistic about the outlook for risky assets this week given the surprise change in the Bank of Japan’s (BoJ) yield curve control (YCC).
As Cointelegraph reported, the move meant immediate pain for the U.S. dollar, and with Wall Street in sight, stock futures were trending down in lockstep at the time of writing.
For Bianco, the fact that the BoJ was now trying to follow the Fed in tightening monetary policy to stave off inflation meant that the latter was unlikely to ease its own policy.
“Again, if JAPAN! moving to a policy change NOW because of inflation, remind me why would the Fed switch anytime in 2023? Read part of a post.
“The answer is they won’t. You can forget about a pivot.”
The really tangible consequences of Japan’s decision may only be felt later, Bianco continued. With rising bond yields, Japan should attract capital both domestically and internationally
“The dollar will be crushed against the yen (or the yen will rise against the dollar). Japan gets a return again. That should drive money back to Japan,” he wrote.
A return to lower interest rates is a key eventuality being priced in by markets beyond crypto, and it’s something that just isn’t paying off anymore, Binanco said. Although BTC/USD is already down almost 80% in just over a year along with the Fed’s quantitative tightening (QT), the pain may not be over for a long time.
“Powell is hawkish,” he concluded, referring to Fed Chair Jerome Powell’s speech last week in which he tried to keep markets from anticipating monetary easing.
“ECB boss Legarde (Madam Laggard) is now talking hawkishly. Kuroda and the BoJ are (now) making moves that show concerns about inflation. Markets may need to reconsider their view on central bank transition.”
10-year Japanese Bond Yield Curve Control (YCC), annotated chart. Source: Jim Bianco/Twitter
Fidelity manager warns of a ‘troubled’ year
Other perspectives attempted to offer a more hopeful outlook for the year ahead while avoiding implicitly bullish language.
See also: “wave lower” for all markets? 5 things to know in Bitcoin this week
Jurrien Timmer, director of global macro at wealth management giant Fidelity Investments, predicts a “sideways” trading environment for stocks in 2023.
“My feeling is that 2023 will be a sideways choppy market, with one or more retests of the 2022 low, but not necessarily much worse than that,” he said tweeted on December 19th.
“Either way, I don’t think we’re close to a new cyclical bull market.”
Annotated chart for market cycle comparison. Source: Jurrien Timmer/ Twitter
In later comments, Timmer added that while he believes there has been a secular bull market since 2009, the “question is whether the secular bull market is still alive.”
The views, thoughts, and opinions expressed herein are solely those of the authors and do not necessarily reflect or represent the views and opinions of Cointelegraph.
