Hedge funds head towards stocks that were impressively soaring during the coronavirus outbreak; Bitcoin price is facing the possibility of larger corrections.
According to the Financial Times, interest in home sports equipment, grocery, retail and health-related shares has increased. Tim Campbell of Longlead Capital Partners, Singapore-based long-term hedge fund, called these stocks “the most profitable at the time of COVID”.
Campbell noted that the current earnings trajectory of pandemic winners seems unsustainable in the long run. He predicted that at some point these winners would return to their pre-coronavirus growth rate.
Analysts have argued that predicting the true value of stock market gains seemed complicated, especially in the environment of extremely low interest rates and massive central bank and government incentives that supported even the worst-looking stocks during the epidemic.
Morgan Stanley strategist Andrew Sheets stated that technology, the best performing industry of the year, is on the verge of experiencing significant declines. He told the FT:
“If we are successful in vaccination and the market thinks that 2021 looks more normal, investors may think,” Let me buy the shares of companies with more circular earnings. ”
Bitcoin and the US stock market rose together in the midst of the coronavirus pandemic and saw a correction together.
When the Federal Reserve’s near zero interest rates combined with the endless bond buying program; He stated that US government bonds reduced their returns. As a result, investors’ appetite for more risky assets increased, which led them to cryptocurrencies and stocks.
In addition, the US Congress’s decision to pass $ 2 trillion in incentive aid was seen as a move that would disrupt the US dollar. This also prompted investors to seek refuge elsewhere, primarily in Bitcoin.
A possible drop in the US stock market risks putting Bitcoin on a similar disadvantage path. Long-term cryptocurrency investor Gordon Gekko called this the “second wave effect”.
When the stock market showed sharper-than-normal signs of decline, investors reduced the risks of their portfolios by shorting the most profitable assets for cash. As a result, gold and Bitcoin, two of the best performing assets before the crash, fell along with the S&P 500, Dow Jones, and Nasdaq Composite.