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Wednesday's selling carried into Thursday as investors continued to take a risk-off approach to markets following the Federal Reserve's latest policy announcement.
The central bank issued its third jumbo-sized rate increase yesterday and set expectations that it will continue to hike rates over its next few meetings. However, the Fed is not alone in its aggressive stance. Several global central banks have increased their benchmark rates this week in an ongoing effort to tame inflation, including the Bank of England and Switzerland's National Bank, which earlier today issued 50 basis point and 75 basis point rate hikes, respectively. (A basis point is one one-hundredth of a percentage point.)
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"Global equities are struggling as the world anticipates surging rates will trigger a much sooner and possibly severe global recession," says Edward Moya, senior market strategist at currency data provider OANDA. "Most of these rate hikes around the world are not done yet which means the race to restrictive territory won't be over until closer to the end of the year."
The reaction here at home was a selloff in bond prices, which sent yields on government notes spiking. The 10-year Treasury yield surged 19.2 basis points to 3.704% - its highest level since early 2011 - while the 2-year Treasury yield spiked 12.1 basis points to 4.116%, its loftiest perch since late 2007.
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As for stocks, the tech-heavy Nasdaq Composite
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Disruption. It's coming for the U.S. dollar in the form of digital currency. Last week the Biden administration detailed a broad plan for adopting a central bank digital currency (CBDC) in the coming years. The Departments of Energy, Commerce, the Treasury, and other agencies weighed in on how to manage and regulate a CBDC.
The government is reacting in part to the explosive growth of digital currencies. About three out of ten U.S. adults currently invest in some form of cryptocurrency, or "crypto," like Bitcoin or Ethereum. These digital "coins" rely on a decentralized network of computers to verify financial transactions, cutting out third parties like banks or credit cards.
The good, the bad, and the ugly of crypto
Advocates of crypto point to its affordability, efficiency, and its ability to reach consumers with little or no access to traditional banking services. With just a mobile phone or a crypto ATM, consumers can easily send and receive digital currency, even across international borders.
On the other hand, crypto is still largely unregulated and volatile. Investors in Bitcoin, for example, saw returns of over 70% in 2021, but the currency is down almost 60% year to date. And if you send your payment to the wrong account (called a "digital wallet") there may be no way to retrieve it. Crypto has also been used for money laundering, fraud, and to fund terrorism. Several
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