Weekly Market Commentary
September 28, 2021

We are in a headline driven market!

The Markets

Central banks have a lot of influence on investors, markets and economies.

For the last year or so, the Federal Reserve has been purchasing $120 billion of bonds every month to ensure United States markets remained liquid and interest rates remained low during the pandemic. Last Wednesday, the Fed announced that it is ready to begin to buy fewer bonds, a process known as tapering. The Fed is not expected to push interest rates higher for some time so, overall, monetary policy will continue to support economic growth.

While rising yields can negatively affect stock prices, they may not hurt share prices if company earnings continue to grow and investors’ appetite for equities remains strong.

Concerns about the health of China’s financial system continues as The People’s Bank of China injected cash into its banking system again last week to reassure investors after a large Chinese company missed a bond payment deadline.

BANNED IN CHINA. China has been trying to limit cryptocurrencies for a long time without much success. In 2019, cryptocurrency trading was banned; however, the practice persisted. Earlier this year, the Chinese government restricted banks and payment companies from providing services related to cryptocurrency transactions and warned buyers they would have no protection if they traded cryptocurrencies, reported the BBC.

Last week, China banned all cryptocurrency transactions and announced that ten regulatory agencies will work together to enforce the ban.

China also banned cryptocurrency mining. Unlike many types of money, cryptocurrency is not issued by a nation’s central bank. It is mined using an energy-intensive process and prior to the ban, China was one of the world’s largest mining centers because of its relatively low energy costs and inexpensive computer hardware.

The ban doesn’t mean China won’t have digital currency. China’s central bank is developing an official digital currency that is being tested now and is expected to be introduced more widely next year. “The ban on crypto appears designed to build support for the official digital currency while signaling to Chinese residents that financial transactions must be traceable and won’t be tolerated on decentralized blockchains.

The United States also is considering how to regulate cryptocurrencies.

Focus On The Positive
“If a business does well, the stock eventually follows.” —Warren Buffet, Investor