The Federal Reserve of the United States is expected to raise rates by half a point this week and on Wednesday. All ears will be tuned in to what Chairman Jerome Powell has to say. Future rate hikes will determine the next catalyst for markets, and policymakers could end up pushing those hikes up faster and farther than previously expected. Investors fear recessions, and it is this fear that has stock investors watching the bond market, which can signal the coming of a weakening economy.
Across the pond, the United Kingdom is sliding into a recession as living costs surge. The British government and the Bank of England face severe financial problems, and the economic data emerging this week will in all likelihood provide the evidence for this. Inflation is set to peak this Autumn, far above the Bank of England’s target of 2%. This has resulted in officials raising interest rates, which of course has resulted in the expected rise in the cost of living.
In what can be seen as terrific or terrible news, depending on which side of the coin you find yourself on, the former Twitter Founder, Jack Dorsey has announced he is building 'Web5', powered by Bitcoin. His confidence was evident when he tweeted, “This will likely be our most important contribution to the internet.”
The decentralized web platform, or DWP, enables developers to create decentralized web apps via DIDs and decentralized nodes, as per the TBD’s prototype documents. Web5 will also feature a monetary network centered around BTC, which mirrors Dorsey’s desire that the digital asset will, in the future, become the internet’s native currency.
Web5 is developed by TBD, a Bitcoin-focused subsidiary of Dorsey’s Block. The company said in its website that the new platform will solve the problem of securing personal data.
In a statement shared with the Coindesk website, the company stated: “Identity and personal data have become the property of third parties. Web 5 brings decentralized identity and data storage to individual’s applications. It lets devs (developers) focus on creating delightful user experiences, while returning ownership of data and identity to individuals.”
Turning even further to the crypto world, the Terra network and its leader, Do Kwon, rose to the highest tier thanks to big-shot investors, only to crumble within a few days in May.
In early May, the algorithmic stablecoin, UST was attacked, resulting in its de-coupling from the US Dollar and the subsequent collapse of UST and its sister token Luna.
Nearly $60 billion of value has been lost in the two tokens. The speed and scale of the collapse naturally gained the attention of top US regulators, but it does not seem likely that they will now seek to push for tighter regulation.
And, of course, there was the great crypto crash last week, with Bitcoin sliding below the $23K mark for the first time in two years, while Binance completely halted all withdrawals.
In addition to these worrying trends, oil prices are expected to continue rising. With gasoline prices in America skyrocketing, experts realize the US is in a critical situation as its economy its threatened and supply chains are strained as Russia moves to redirect its oil exports away from Europe.
If energy prices remain high for a lengthy period of time, demand will fall sharply as Americans skip the pump and stay home. The US economy will suffer and global growth will slow as well.
And, in yet more worrying news, Deutsche Bank has predicted that the US corporate default rate will spike to 10 per cent. Defaults will then moderate, but more slowly than has been the norm over the past two decades, and remain elevated at around 4 to 5 percent by the end of 2025.
However, seasoned investors will understand that these are trends born out of unique circumstances and all such circumstances tend to be temporary. National calamities, disasters and crises have come and gone. Two world wars took place and societies and economies were destroyed. But, with time, economies recover, markets stabilize and investors can mop the sweat from their brows and breathe a sigh of relief until the next crisis.
Will the markets rebound in 2022? According to a report in Bloomberg by JPMorgan Chase & Co.'s strategist, Marko Kolanovic, the market will recover. In his view, the US stock market is poised for a gradual recovery in 2022, and the S&P 500 Index will likely end the year unchanged.
