Hedge fund chief’s inflation forecast and what it could mean for crypto (Opinion)

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In an interview with CNBC during the week, a leading hedge fund manager predicted that massive inflation will lead the Fed to hike interest rates six times by 2024. Crypto traders are watching closely. macro-financial environment as they end another volatile month. .

Federated Hermes has over $ 600 billion in assets under management. Phil Orlando, chief equity strategist at investment firms, has been a longtime stock market bull, but expects big changes in the Federal Reserve to dampen this year’s stock market rise .

Orlando: big inflation and federal government actions

Speaking to Stephanie Landsman on CNBCs Trading Nation on Wednesday, Orlando forecast a series of rate hikes ahead, but likely not until the third quarter of next year:

Our best guess is that we will see two quarter point rate hikes from the Fed in the second half of next year, and maybe four more quarter point rate hikes over the course of the next year. calendar 23.

While the White House administration and the Federal Reserve have gone from saying deflation is the real danger to insisting that inflation is only temporary, Orlando doubts they believe what they say. :

The Fed has, I think, to some extent talked about a good game with the Biden administration in terms of temporary or transient inflation.

He cited as evidence the minutes of the Federal Open Market Committee’s November meeting, where members said they believed current conditions already warranted cutting back on the Fed’s massive liquidity operations.

This includes the Fed’s shopping spree with a blank check to buy US Treasury bonds, mortgage-backed bonds, and overnight money market loans.

Federal government impact on crypto

The products of the crypto industry are somewhat of a market substitute and a competitor to government fiat currencies and conventional investments like stocks denominated in these currencies and priced in markets that operate well upstream. global finance, close to the Fed’s sources of new credit. in the US banking system.

But as institutional and traditional retail investors continue to adopt and adopt digital assets, they increasingly become a complementary financial product. As a result, the central bank’s efforts to bring inflation under control could hit crypto valuations with a double headwind.

While the digital gold thesis underlying Bitcoin made the world’s first successful cryptocurrency an asset uncorrelated to equities in a decade, the acceleration of mainstream adoption saw the price. correlated with stock markets starting about a year ago and continuing into this year.

As interest rates rise, investors can earn higher returns than usual through less risky investments than peer-to-peer cryptocurrencies or corporate stocks.

And if Washington strengthens the U.S. dollar, deflationary cryptocurrencies used to shield savings from inflation may lose some of their appeal.

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