Bitcoin has fallen less than major U.S. equity indices in the first quarter but still hasn’t proven it can act as a “safe haven” in times of market turmoil.
The cryptocurrency fell over 10% in the first three months of the year.
Meanwhile, gold rose about 4% in the first quarter.
Financial markets have had a volatile three months as the coronavirus outbreak turned into a pandemic. Hundreds of thousands of people have been infected around the world, leading to businesses shutting down, major travel restrictions and people staying at home.
The economic impact is expected to be severe and that has led to a huge sell-off in stocks despite monetary policy action from central banks and fiscal stimulus from governments around the world.
Cryptocurrencies saw huge volatility in the first quarter. On March 8, the whole market sold off following a plunge in oil prices. Then on March 12, cryptocurrencies saw $93.5 billion wiped off their value in 24 hours and a 48% crash in the price of bitcoin.
Those inside the cryptocurrency industry, however, feel that this could be starting to shift.
Markets Face Real Test After 1st Quarter Coronavirus Concerns
April will pose a crucial test for stock-market investors looking for signs that the worst of the market carnage triggered by the global COVID-19 pandemic is past, as the outbreak continues to claim lives and promises historic, near-term economic pain.
“The coming weeks will be a blizzard of bad news — both on the economy and public health,” said Zach Pandl, macro strategist at Goldman Sachs, in a Monday note. “We doubt that markets will be able to price out adverse tail risks against that backdrop, and new challenges might emerge, including sovereign downgrades, FX peg breaks, or a wave of business failures.”
But some investors and analysts contend that while markets are likely to remain volatile, the stock market’s bounceback last week after tumbling with record speed from all-time highs into a bear market, gives hope that March 23 lows for major indexes may more or less hold.
Even hopeful investors often caution that bear markets are typically volatile and often see sharp rebounds before retesting lows or going on to decline even further before finding a bottom.
Keith Lerner, chief market strategist at SunTrust Advisory, said the lessons of past bear markets would normally lead him to place the probability of a retest of the market low somewhere between 70% and 80%. But he thinks the odds of a retest of the March 23 low are instead closer to 50/50.
“The market already knows that the economic data in the weeks and months ahead will be weak.
For example, last week’s first-time weekly jobless claims figure soared past the previous record to top 3 million, yet markets rallied on the day, Lerner observed.
The Key Points in the Markets
Jeffrey Gundlach on Tuesday said that the worst isn’t over for the stock market, after a brutal quarter that left the Dow with its worst decline in the first three months of a calendar year in its 124-year history.
Speaking during a webcast, the DoubleLine Capital founder said that the stock market remains “dysfunctional” from his perspective, indicating that the market may put in a more “enduring low,” once the March 23 nadir for stocks is “taken out.”
Gundlach speculated that the market could slide lower still. “I would bet that will get taken out,” he said, referencing the March nadir.
A day after the March low, the DoubleLine CEO speculated that the S&P 500 could jump to 2,700 before the coronavirus relief package was signed into law.
The S&P 500 hit an intraday March 24 peak at 2,637.01, but has mostly been retreating since then.
At the beginning of March, the Los Angeles bond-fund manager offered what turned out to be sage advice, recommending that investors stay in cash during the coronavirus pandemic.
He advised investors back then to pay attention to the economic data that will reveal the damage wrought by COVID-19, which has so far caused a near-global shutdown as governments across the world attempt to mitigate the spread of the deadly infection, which has been contracted by more than 850,000 people and killed 42,000 so far, according to data compiled by Johns Hopkins University.
Gundlach said watching the direction of weekly U.S. jobless claims data, along with consumer confidence, could be helpful in seeing how households — the linchpin of the economy — are holding up.