Which was the best performing asset class in Q3? believe it or not, it was Bitcoin,
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world’s largest cryptocurrency Tops the ranks with 3.1% return. Hmm.
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Yeah – there’s probably nothing more disgusting in a market than a positively scrapping the best-performing asset class. precious metals It yielded 1.3%, while cash investors rejoiced at a 0.2% return. Every other asset class? Negative.
As inflation declined, the Federal Reserve raised rates, sending the markets into a tailspin. Throw in a war in Europe, an energy crisis as winter approaches, and myriad other recession factors, and begin to understand why the market is falling.
Bitcoin is one of the worst assets
A different story emerges when we look at the annualized returns instead of just the third quarter. As shown in the chart below, bitcoin has broken free, losing half its value so far – just south of some other major asset classes.
As the market has risk-off, returns have generally been in line with what is expected during bear markets. That is to say, the further on the risk spectrum, the further the asset has fallen.
For crypto, this is bad news and the reason why bitcoin is so rotten. It also explains how nearly every other cryptocurrency has fallen in comparison to bitcoin.
In view of the above data, s & P 25% is down, almost half that of bitcoin. I would have actually guessed it would be more, had you asked me at the beginning of the year where bitcoin would be if the stock market fell by 25%.
Nasdaq The risk is ahead of the curve, being more tech-focused, with a drop of close to 30%. And Sleep Does what gold does – hangs there.
Dollar is the best performing asset
In times of crisis, investors flock to safe-haven assets – for proof of this, look no further than the fact that the US dollar has been incredibly strong so far this year, dominating nearly every currency around the world. .
After all, nothing is more secure than the US dollar. Adding to the fact is that so many liabilities around the world are USD-denominated, meaning that debtors scramble to get dollars. Additionally, the Federal Reserve has moved more aggressively than many other major currencies such as Europe and Japan, attracting capital inflows to take advantage of higher yields and thus further strengthening the dollar.
What holds Q4?
The fate of bitcoin, stocks and other assets in Q4 will largely depend on inflation and interest rate hikes (what’s new?).
next CPI Reading is Thursday (October 13)th) and so we should see volatility to close out the week and an indication of what things might hold for Q4. If inflation eases, expect the Fed to sell more across the market.
But if Q4 can deliver OK CPI readings, and avoid major negative macro impacts, it could at least be in store to outperform a terrible Q3. In other words, in the short term, no one knows. But the next part is training all eyes on Jerome Powell this Thursday.
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