Markets have been insane this week and I’ve been shopping the discounted prices. Everything is red and people are freaking out. It was a bloodbath and hard to look at our portfolios. But the reasons for this have been found and a recovery will happen.
GameStop Does It Again
On Wednesday, GameStop and several other meme stocks made another run for it. GameStop in particular jumped over 50% before closing. After-hours trading saw the stock soar even higher, touching just under $200.
People went crazy. Trading volume surged and the Internet exploded, desperately trying to catch the wave for a nice profit. Even I was tempted to jump in. However, this gambling was too risky for my taste and I stood on the sidelines.
Luckily I did, as trading seemed to flatline on Thursday following Market open. The price is still considerably high, but there wasn’t much growth during the day to make any significant profit. That made me feel better since I didn’t join!
Even Reddit was shut down for an hour on Wednesday. Without any type of notice beforehand. Perhaps trying to prevent another big short squeeze.
Market down all week
It’s been a bloodbath all week in the stock market. Everything dropped, leaving very few green positions to be seen. Tech stocks and even recovery stocks plummeted hard. My portfolio did not look good yesterday.
But why did it crash so hard? 3 reasons:
- The economy is set to fully recover soon. Ironically this means interest rates will start to increase and stocks will slow down on their insane growth periods. The higher interest rates would have a direct impact on corporate lending and mortgage rates . Equities will then be put under pressure, slowing down earning’s upward trend movement.
- Bond yields rose this week, signaling possible interest rates increases by the Fed. This scared investors was another factor in the massive drop this week.
- The last reason was the fear of inflation. If the economy re-opens again, then inflation will naturally increase. Jerome Powell assured everyone that won’t happen for awhile, investors are still worried, impacting stock performance this week.
Treasury Yields Rising
US Treasury yields rose Wednesday, while traders considered a possible selloff in longer-dated government bonds and concerns for inflation rising.
The 10-Year Treasury bond rose 2.5 points to 1.475% while the 2-Year note rate went up 0.125% early Thursday morning. Even the 30-Year bond yield jumped 2.25%. But what drove these yields to rise?
Jerome Powell spoke this week about concerns over growing inflation rates. He confirmed a longer timetable for when interest rates will increase. His comments were thought to have helped calm the volatile markets, but longer-term rates continued to push higher and the market continued to sink.
Long-term treasury rates have risen lately, due to worries of inflation expected to emerge later this year. This could be driven by the re-opening of the economy, a surge in spending and expected fiscal relief from the Government.
Crypto Dropping Fast
The cryptocurrency market has been dropping hard this week as well. Bitcoin fell to the low $40k range, taking every other coin with it. Right now, the price target is around $42,500 where it will meet further support. Hopefully it will spring off these support lines and take us closer to our all-time high. However, if this correction is anything like the last one in January, we likely won’t see any positive upward movement until end of March.
Let’s hope that isn’t the case and we start seeing some more all-time highs soon. Bitcoin enthusiasts have been coming out with new ridiculously high predictions for the coin and I’m hoping we see something move towards it. This current bull run will likely see close to the $300k range, but the next bull run cycle will likely see some ridiculous price targets.
$15 Minimum Wage Rejected
An increase in minimum wage to $15 was included in the latest COVID relief bill, but was outright rejected. It was said it didn’t have significant enough effect on the federal budget to be included in the bill. The Senate parliamentarian, Elizabeth MacDonough, had put her foot down.
However, Democrats can choose to ignore her and include the $15 minimum wage in the legislation anyway. This is very rare and unprecedented, not favored by many. There is a lot of interest in gradual minimum wage increases, so we may see them take a different route on the way to $15.
