Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
More View more
Corporations Embrace Crypto, Boosting Bitcoin Price - Stock Market Forecast

Corporations Embrace Crypto, Boosting Bitcoin Price - Stock Market Forecast

Peter Hanks, Strategist

Stock Market Forecast: Bullish

Advertisement

Corporations Embrace Crypto, Boosting Bitcoin Price - Stock Market Forecast

The Nasdaq 100, Dow Jones and S&P 500 bled lower last week despite upbeat economic readings in the form of retail sales and services data. Losses have seen the indices pull back from record levels, but volatility remains reasonable and symptoms of risk appetite simmer beneath the surface evidenced by corporations diving into Bitcoin headfirst. Breaking above $55,000 for the first time Friday, Bitcoin has benefited from a wave of corporate adoptions ranging from Tesla and Microstrategy to Mastercard and Morgan Stanley.

Equities Forecast
Equities Forecast
Recommended by Peter Hanks
Get Your Free Equities Forecast
Get My Guide

While equities cool off near record levels, corporate leaders have moved into the cryptocurrency market as they look to gain exposure – in one way or another – to the Bitcoin craze. Regarded as the future of finance by some and an unfounded bubble by others, Bitcoin’s price rise is undeniable and the explosive performance might be prolonged now that institutions are entering the space. Either way, it can be argued increased participation in the cryptocurrency space is indicative of risk appetite.

S&P 500 Price Chart: Daily Time Frame (January 2018 – February 2021)

S&P 500 price chart

Nevertheless, risk appetite was trimmed last week despite encouraging economic data and enflamed reflation hopes. That being said, price action might suggest the market has entered a stage where the relationship between rising rates and equity exposure is becoming more of a tradeoff than it has been in recent months.

Video Explainer – What Rising Treasury Yields Mean for US Equities and Gold

Should Treasury yields continue to climb, equities may face considerable headwinds – especially if the 10y yield overtakes the S&P 500 dividend yield. As it stands, the S&P 500 dividend yield rests around 1.5% with the 10y yield hovering around 1.3%. Since Treasuries are effectively risk-free, the risk premium offered through equity exposure is significantly reduced as rates rise and investors may rotate out of the stock market as a result.

Starts in:
Live now:
Oct 03
( 02:10 GMT )
Recommended by Peter Hanks
Cross-Market Weekly Outlook
Register for webinar
Join now
Webinar has ended

Suffice it to say, the stock market is in a somewhat precarious position in some regards, but it is against a backdrop of improving economic data and a reopening economy. With that in mind, investors should closely track Treasury yields in the weeks ahead as they could prove vital to the performance of the S&P 500, Dow Jones and Nasdaq 100. In the meantime, follow @PeterHanksFX on Twitter for updates and analysis.

--Written by Peter Hanks, Strategist for DailyFX.com

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES