With the US Federal Reserve firming up its ante against inflation and dismissing discussions about any softening of monetary policy. JPMorgan’s chief global strategist, David Kelly, has made some suggestions for crypto investors concerned about the direction of the market.
In an interview Friday after Fed Chair Jerome Powell’s speech at Jackson Hole, Wyoming, Kelly said that the best way to be positioned now is to focus on valuations and avoid looking at short-term direction.
“The economy has got one foot into a recession and the other on the banana peel now. Make sure you overweight US and international value, as well as stocks with relatively low price-to-earnings ratio.”
Kelly: Sell Bitcoin and Crypto
Traditional, as well as the crypto market, suffered major declines since the beginning of the year on fears of tighter monetary policies to stamp out inflation which has hit the highest levels in forty years. As a result, the economy is slowly being dragged into recession.
After Powell stressed that interest rates may have to stay elevated to curtail inflation in his latest speech, Bitcoin briefly plunged below $20,000 for the first time since mid-July, as risk appetite faltered. According to Kelly, investors should now steer clear of large-cap tech stocks, Bitcoin, and crypto in general. He expects more volatility to seep in and a high risk of a recession.
Having said that, the strategist believes that the economy will feel more normal by the end of next year. Kelly also added that the “Federal Reserve is overestimating the strength of the US economy as it feels guilty about the fact that inflation went up under their watch.”
Risk-On Assets to Continue Struggling
Many experts are of the opinion that risky assets will continue to struggle as Powell tackles inflation with a restrictive monetary course. Edward Moya, senior market analyst at Oanda, in a recent email, said that this aggressive approach may also trigger an economic slowdown.
“Bitcoin weakened after Fed Chair Powell didn’t blink with his reiteration that the Fed will tighten policy to bring down inflation. Risky assets are struggling as Powell’s fight against inflation will remain aggressive even as it will trigger an economic slowdown.”