The US Federal Reserve has been taking measures to tame the growing inflation levels in the country. The Fed has also dismissed discussions about softening the monetary policy. The chief global strategist at JPMorgan, David Kelly, has also suggested that crypto investors be cautious of the direction the crypto market will take.
The chair of the US Federal Reserve, Jerome Powell, held an interview last week, and his speech is sparking controversy on the direction the cryptocurrency market will take. During the interview, Kelly said that the best way to be positioned was to avoid looking at the short-term price action of tokens.
Kelly said that the economy was headed towards a recession, adding that investors should take a deeper look into the US and global economic performance and analyze stocks with low price-to-earnings ratios.
2022 has seen some of the most notable losses in both the traditional and crypto markets. The financial markets have suffered notable losses since the beginning of the year because of a growing fear of a tightening monetary policy to slow down the inflation levels at a forty-year high. The decline has created fears that a recession could be on the way.
Powell also said that the interest rates would have to remain high to tame inflation. The latest speech by Powell led to Bitcoin dropping below $20K for the first time since mid-July as the risk appetite dropped. Kelly also said investors should avoid large-cap tech stocks and crypto assets. He also expects volatility to increase and trigger a high risk of the economy entering a recession.
The strategist also believes that the economy will reach normal levels by the end of 2023. Kelly has also said that the Federal Reserve was overestimating the strength of the US economy, and it felt responsible for the rise in inflation levels.
Risky assets struggle amid Powell’s tackle on inflation
Several analysts believe that risky financial assets will continue with a bearish trend as the Federal Reserve looks for ways to tame inflation. A recent email by a senior market analyst at Oanda, Edward Moya, said that the aggressive approach taken by the Federal Reserve could cause an economic downturn.
In the email, the analyst said that the tightening monetary policies weakened Bitcoin. Risky assets were struggling to keep up with the inflation levels that have remained aggressive and are at risk of causing an economic downtrend.