In general it is seen that the stock markets, especially the major indices like the S&P 500 and the Dow Jones, are representative of the state of the economy in the US. When there are poor factors impacting the economy, the markets closely mirror this.
This was clearly seen as the case when the impact of the Covid-19 pandemic was realized across the US and the markets took a tumble in the middle of March, and has been the case in most major troubled times for the country.
This is also where the notion of safe haven assets has come into play, with gold being the mostmature and settled choice, but the growing narrative of Bitocin being a hedge also shining through.
However, the recent upheaval in the US, which comes off the back of the ongoing Covid-19 impact, does not seem to have deterred the markets that much, which is odd. Additionally, the price action of Bitcoin has not responded to the protests and riots across the globe.
One explanation, which was offered up by Morgan Creek Digital co-founder, Anthony Pompliano, is that the economy is actually in a start of return following the initial peak of the Covid-19 shutdown.
“Yes there are protests, there are all these things, but the bigger force is the fact that now all these businesses are opening up,” Pompliano said on his YouTube channel. “There’s going to be more economic activity and there should be a recovery in that data.”
The rally has been growing over the last few days as the Dow Jones Industrial Average pushed past 26,000 on Wednesday as investors bet on a strong economic recovery. The index climbed 527 points, or 2 percent, while the S&P 500 rose 42 points, or 1.4 percent.
The Dow first reached the 26,000 marker briefly in January 2018, and returned to that level most recently this past summer.
Still, it seems odd that the turmoil across the US is having no impact in either the traditional markets, or the Bitcoin markets. Pompliano explained the markets have no emotion. People can be emotional in their investing and trading, but the market itself has no feeling
“What’s happening right now is people are speculating on the economy’s reopening,” Pompliano said in relation to the upward moving market.
He explained further:
“They’re speculating that there’s going to be future recovery. You see all the stocks rallying. Then as the price rallies like we’ve seen, everyone starts to FOMO in and buy more and more and more, and it pushes the prices up higher. Plus, you layer in all the federal reserve printing of money.”