Ever since March of last year, where most of the world’s markets crashed heavily on the realisation of Covid-19’s impact, the appetite for risky investment has been extremely low. Many have been waiting to see how the global economy recovers from the pandemic, and the signs are starting to show.
In the US, the powerhouse of trading and investment, there has been special attention paid to government policy in regards to the handling of the pandemic. The new Biden administration has put through a new stimulus plan, but also spelled out a new infrastructure plan that ranges in at $2.2 trillion.
US policies have already played their part with the markets, and as PrimeXBT analyst Kim Chua notes,after the hiccup regarding rising yields sending risk assets correcting lower, the markets are back to risk-on mode again after Biden announced his $2.2 trillion infrastructure plan.
This new spending will again be financial by USD printing, which will send the USD back lower and stop yields from rising. With yields stable at 1.67% and the US government having just given out $1.9 trillion in reliefs, this additional $2.2 trillion if approved, will not only cause optimism to spike, thereby shoring up risk assets, it will also fuel higher inflation, which will mean higher asset prices.
Employment is recovering, which means people will have more ability to spend. Earnings by companies will then increase due to increase in economic activities and higher spending by consumers. Either way, everything points to higher stock prices, and way higher crypto prices.
The S&P has already broken 4,000 on the back of this positive news and I see the stock markets a lot higher than they are now by September. For cryptocurrencies, the timing cannot be better for a $100,000 BTC and $3,000 ETH by that time.
The rise in traditional markets thanks to this risky appetite is of course pleasing, but it is further highlighted in the growth of cryptocurrencies. Still seen as incredibly risky and volatile, a bigger appetite should help bolster these digital assets in the coming months.