Markets
Bank of America Says Not to Sell Ahead of CPI Report: Crypto Impact
Bank of America has issued a timely warning to investors: resist the urge to sell in May, especially ahead of the next Consumer Price Index (CPI) report.
This advice comes as April 2024 CPI data, set to be released by the US Bureau of Labor Statistics on May 15, approaches financial and crypto markets.
Bank of America Affirms HODL
According to the Cleveland Federal Reserve, the CPI advance report is expected reflect ongoing inflationary pressures, with forecasts suggesting a 0.4% increase in overall value inflation and a 0.3% increase in core inflation. Kalshi, an event prediction website, predict inflation will fluctuate between 3.3% and 3.5%.
These numbers, if accurate, would mean that inflation remains well above the Federal Reserve’s 2% target.
O The Federal Reserve maintained a strict stance on inflation, increasing interest rates to contain rising prices. Despite these efforts, inflation proved to be persistent, especially in the shelter category, significantly impacting the CPI index.
Inflation forecast in April 2024. Source: Kalshi
The Federal Open Market Committee (FOMC) hopes that reducing shelter costs will ultimately help it reach its inflation target. However, until now, there has been little evidence of such a trend.
As the market prepares for the CPI report, Bank of America analysts to recommend postponing the sale of investments. Historical data indicates that the S&P 500 performs well in the summer months, especially in presidential election years.
“The S&P 500 (SPX) tends to have a summer rally, and presidential election years can have big summer rallies,” the bank said.
From June to August, this period has historically been the strongest second quarter, with an average return of 3.2%. In election years, the average return increases to 7.3%, with the S&P 500 rising 75% of the time. Meanwhile, Bitcoin’s average return during election years is 23.68%.
The next elections, the CPI reports and the subsequent ones Federal Reserve Actions are closely watched in the crypto market.
Bitcoin, in particular, is expected to be impacted by these economic indicators, with institutions beginning to show their appetite for this new asset class. For example, Susquehanna International Reported Holding $1.2 Billion in Bitcoin across ten ETFs, while Hightower disclosed $68 million in Bitcoin holdings across six ETFs.
This institutional interest suggests confidence in Bitcoin’s potential as a hedge against inflation and economic uncertainty.
See more information: Bitcoin Price Prediction 2024/2025/2030
While the market awaits the CPI report, investors are advised to remain cautious and avoid hasty selling. The interplay between inflation data, Federal Reserve policies and market trends will be crucial in shaping markets in the coming months.
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