Author: Revc, Jinse Finance
After Trump confirmed his return to the White House, the US stock market and the cryptocurrency market experienced a week of consecutive gains, but accompanied by a surge in US bond yields and a strengthening of the US dollar, the upward trend of the US stock market has slowed down. Investors' attention has gradually shifted from the "Trump trade" to the upcoming release of the US Consumer Price Index (CPI) report (9:30 pm Beijing time on Wednesday), which may determine the future monetary policy of the Federal Reserve. This CPI data also has a significant impact on the cryptocurrency market and will determine the short-term market trend.
Analysis of the Factors Affecting the Fluctuations in the US Stock Market
Trump's victory raised investors' hopes for his tax cuts and deregulation policies, which drove the US stock market to rise. However, Morgan Stanley believes that this optimistic sentiment faces three major risks: rising US bond yields, a strengthening US dollar, and overvalued stock market valuations. With US bond yields continuing to rise, investors are concerned that the Federal Reserve may maintain a higher interest rate policy, thereby weakening the momentum of the stock market's rise. The market's confidence in the future rate cut process is not high, and the high valuation of US stocks also makes investors worry about price bubbles, which may trigger a correction.
In addition, the strengthening of the US dollar is unfavorable for the profitability of multinational companies, further suppressing the trend of the US stock market. If the US dollar continues to strengthen, it will put pressure on the S&P 500 index. The superposition of these factors may lead to an increase in investors' demand for safe-haven, thereby driving the further rise of US bond yields and exacerbating market uncertainty.
The Key Impact of CPI Data
The upcoming October CPI data is one of the key factors in determining the Federal Reserve's policy. The market expects that the October CPI will rise 2.6% year-on-year, slightly higher than the 2.4% in September. If the actual data exceeds expectations, the Federal Reserve may slow the pace of rate cuts, which will be negative for the market. Federal Reserve official Kashkari hinted that if the CPI data exceeds expectations, it is highly likely that the interest rate will remain unchanged at the December meeting.
The Linkage between the US Stock Market and the Cryptocurrency Market
On Tuesday, the three major US stock indexes all closed lower, with the S&P 500 index ending a four-day winning streak. The Dow Jones Industrial Average fell 382.15 points (-0.86%) to close at 43,910.98 points; the Nasdaq Composite Index fell 17.36 points (-0.09%) to close at 19,281.40 points; the S&P 500 index fell 17.36 points (-0.29%) to 5,983.99 points. In individual stocks, NVIDIA rose 2%, Tesla fell 6%, and Trump Media & Technology Group fell 8.8%.
Bitcoin, after attempting to touch the $90,000 mark, retreated to around $86,000, and its price performance has become more closely related to the traditional financial market.
The development prospects of the cryptocurrency market are not only affected by the Federal Reserve's policy, but may also be affected by the fluctuations in the future trend of the US stock market. If the Federal Reserve delays rate cuts due to inflationary pressure, the cryptocurrency market will also be negatively impacted by the reduction in global financial market liquidity. However, with the implementation of the crypto-friendly policies of the Trump administration, the cryptocurrency market is expected to strengthen its fundamental stability. In addition, small-cap coins and meme coins have shown higher volatility in a market environment with strong liquidity, and if the market sentiment improves, the cryptocurrency market may experience a wave of upward momentum.
Summary
With the CPI data about to be released, the factors of rising interest rates and a strengthening US dollar facing the US stock market may lead to short-term market volatility. Investors can seize the opportunity of the linkage between the US stock market and the cryptocurrency market, but also need to closely monitor the adverse impact of the CPI data on market sentiment.
