John Normand, JPMorgan’s executive director of cross asset fundamentals strategy, said cryptocurrencies were hard to appreciate when other assets plummeted.
According to MarketWatch, he pointed out that in the current environment of the outbreak of new coronavirus, the market is mainly troubled by three major factors, namely, the sharp fall in the US stock market, the possible impact of the second wave of foreign import in China, and the price war launched by the organization of Petroleum Exporting countries (OPEC).
As a result of these factors, global stock markets were bloodied on Monday, and the S & P 500 index fell 7% in the day, triggering a circuit breaker protection mechanism. Since the U.S. stock index circuit breaker mechanism was introduced in 1987, it was triggered only once on October 27, 1997, when the Dow Jones industrial index plummeted by 7.18%, the biggest drop since 1915.
Normand said Saudi Arabia’s decision to increase production resulted in crude oil prices falling by more than 20 per cent, with a market shock comparable to the supply shock caused by the collapse of Lehman Brothers in 2008 and the last OPEC price war in 1986.
He pointed out that the oil price war will reduce the US capital expenditure and corporate profits in the shale gas field, worsen the fiscal and trade balance of a few large emerging market economies, bring high risk of downgrade and default to American enterprises, and weaken emerging markets.
In addition, the collapse of oil prices will make the central bank’s interest rate expectations tend to zero. By the second half of this year, the policy rates of the Federal Reserve, the European Central Bank and the Bank of Japan may fall to zero or lower for the first time in history.
Normand believes that at least two-thirds of traditional hedge funds have risen in the face of major stock market declines, with the dollar performing best against emerging market currencies, followed by the yen against the dollar.
Cryptocurrencies didn’t work because “they’re limited to financing tools, so it’s hard to appreciate when other assets plummet.”