Global Equities See a Historic Downtrend to End The First Half of the Year

Historic Market Downtrend Concludes The First Half of Year

As the first half of the year comes to a close, major equity indexes in the U.S. stock market posted their worst first half of the year in decades. This historic drop in market performance happens as the global economy is faced with geopolitical turmoil and unprecedented inflation. Central banks globally have continued to raise rates to conduct quantitative tightening after the coronavirus pandemic created a risk-on environment where monetary policy encouraged borrowing and spending.

Wall Street bank JP Morgan Chase recently released new estimates of the U.S. economic outlook, with the latest estimates coming ‘very close’ to recession levels. The bank reduced its estimated annualized GDP growth to 1% for the second quarter, down from 2.5%. The likelihood of a recession has increased in the eyes of many analysts on Wall Street, raising concerns about inflation eating into consumers’ spending abilities. The Atlanta Fed tracking model, known as GDPNow, lowered its forecast of U.S. GDP for the second quarter to a contraction of 2.1%, down from a 1% decline previously estimated on June 30th.

European Economy Facing Crisis

In its latest Financial Stability Report, the Bank of England warned that the state of the economy has ‘deteriorated’ significantly and suggests to consumers that they should be prepared for expenses, such as cost of living, to continue to increase. “The Russian invasion of Ukraine could cause more disruption to global energy and food markets. There are also risks from abroad that could indirectly affect the U.K.,” the Bank of England wrote. They also stated that U.K. banks could weather global uncertainty, but they can only do so if they set aside more capital to weather economic volatility.

The Eurozone is experiencing record-high inflation primarily due to skyrocketing energy prices. Inflation reached over 8.6% in June as the fallout from the war between Russia and Ukraine continues to affect neighboring countries.

Bitcoin In the Spotlight

Despite bitcoin’s performance this year, El Salvador announced that it is continuing to buy bitcoin. President Nayib Bukele announced last Thursday that the country had accumulated 80 more bitcoin at a price of $19,000, over 57% lower than its all-time high. It is estimated that El Salvador has spent $106.3 million accumulating bitcoin since the digital currency was approved as legal tender.

Grayscale Bitcoin Trust, or GBTC, is at a record discount to bitcoin’s spot price as legal battles between Grayscale and the SEC continue. The SEC recently denied Grayscale’s latest attempt at launching a spot-driven Bitcoin ETF. Grayscale immediately filed a lawsuit against the SEC after the rejection. The discount between the share price of the Grayscale Bitcoin Trust and the equivalent value of its underlying bitcoin has increased to 31% from 28.4% after the SEC announced its decision.