Weekly digest: UK Slams Crypto, Recession Alert

Investment news

Wall Street and Main Street are bullish on gold this week and expect higher prices right below the $1,800 an ounce level.

Gold ended last week up around 1% after dropping sharply on the Fed’s hawkish rate increase announcement in the previous week.

U.S. stock futures were mixed Monday after the S&P 500 climbed to a record high on Friday and had its best weekly gain since February while the Nasdaq logged its best week since April.

Ahead of the new week, the S&P 500 was up nearly 14% this year; the Dow was up 12.5% year to date; and the Nasdaq was up 11.4% in 2021.

Bitcoin’s multi-month price decline may be coming to an end and is set for a record of at least $70,000 by year-end, analysts say.

“I definitely think we can see something north of $70,000 by the end of the year. I think that we can expect all that FUD [fear, uncertainty, doubt] that we’ve seen in recent weeks to kind of cause a flat trend in the market through the summer,” Jason Urban, co-head of Galaxy Digital Trading at Galaxy Digital, said.

Crypto gets a red flag warning: UK’s financial watchdog banned the world’s largest cryptocurrency exchange Binance from doing business in the country. This has already been labeled as “one of the most significant regulatory moves to date” against crypto.

Binance, however, said the notice would have no "direct impact" on the services it provides from its website Binance.com since its existing crypto exchange is not UK-based. Despite the FCA ruling, there will be no impact on UK residents who use the website to buy and sell cryptocurrencies.

Binance.com is one of the world’s largest online exchange platform offering a range of financial services, including purchasing and trading a wide range of cryptocurrencies.

Facebook has hit $1 trillion in market capitalization after its stocks soared helped by a favorable legal ruling that dismissed an antitrust complaint brought by the Federal Trade Commission.

Facebook is the fifth U.S. company to reach the milestone, joining Microsoft, Apple, Amazon and Google-parent company Alphabet.

What else is happening

Sam Zell was wrong*? Fed Chair Jerome Powell said it’s ‘very, very unlikely’ the U.S. could see a repeat of 1970s-style inflation. And yet he acknowledged that some inflation pressures are stronger than anticipated.

“I will say that these effects have been larger than we expected, and they may turn out to be more persistent than we have expected. But the incoming data are very consistent with the view that these are factors that will wane over time, and inflation will then move down toward our goals and we’ll be monitoring that carefully,” Powell said.

*Read our SPOTLIGHT article on Sam Zell.

El-Erian seems to think differently, though… The renowned businessman warned the Fed risks another recession if it is forced to catch up on inflation, stressing that signs are already showing inflation is here to stay.

“Every day I see evidence of inflation not being transitory, and I have concern that the Fed is falling behind and that it may have to play catch-up, and history makes you very uncomfortable if you end up in a world in which the Fed has to play catch-up,” Mohamed El-Erian, chief economic advisor at Allianz, told CNBC.

And if the Fed fails to do that, it may have to increase interest rates and tighten its monetary policy faster than it would like.

“Normally, we end up with a recession because you have to slam on the brakes as opposed to slowly taking your foot off the accelerator, which is what I believe is going to happen,” El-Erian added.

Talking about the Fed: the Fed’s Rosengren said there’s a possibility that a rate hike could come as soon as late 2022 as the job market is improving.

“The criteria is that we have a sustainable inflation rate, that’s 2% or above, and that we’re at full employment,” Rosengren said in a broadcast interview with Yahoo Finance. “I do expect that it’s quite possible that we will see that by the end of next year, but it does depend on whether the economy progresses as strongly as I’m expecting,” Federal Reserve Bank of Boston President Eric Rosengren said.

”You say that, but…” At least 9 million Americans, who lost their job during the pandemic, didn’t get unemployment benefits despite the largest deployment of economic aid in U.S. history.

Data shows half of the 64.3 million people who applied for unemployment assistance did not get any money under that program.

And finally…

Warren Buffett said his children will get almost none of his $100 billion fortune. Are you itching to know why?

“After much observation of super-wealthy families, here’s my recommendation: Leave the children enough so that they can do anything, but not enough that they can do nothing,” Buffett said in a note to shareholders.

But don’t get fooled. It’s not exactly like Buffett’s kids, now in their 60s, haven’t got anything from their dad. Each child reportedly has a $2 billion foundation funded by Warren.

See you next week!