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Inferno market report: JP Morgan says sell your dollars

Inferno market report: JP Morgan says sell your dollars

Analysis

The bank warns the dollar’s dominance could be coming to an end, and to prepare accordingly. 

 

JP Morgan has urged its international high net-worth clients to reduce their exposure to the dollar in favour of gold and international currencies

 

The investment bank did not recommend them to buy bitcoin, but the wider effect could be the same. The bank’s CEO, Jamie Dimon, is famous in cryptocurrency circles for denouncing Bitcoin as a scam and then going on to launch JPM Coin. Now, Dimon is inadvertently doing his bit for the crypto world again by warning that the days of the dollar’s dominance may be coming to an end.

 

The portfolios of its high net-worth clients are exposed to the dollar to the tune of around 80%. The bank’s analysts suggest cutting that by up to half, down to just 40%, replacing it with gold, Chinese renminbi, euros, Swiss franc and even the British pound.

 

‘The US dollar has been the world’s dominant reserve currency for almost a century,’ the bank’s strategist Craig Cohen wrote. ‘However, we believe the dollar could lose its status as the world’s dominant currency… due to structural reasons as well as cyclical impediments.’

 

Various currencies have been in the news recently, competing to see which can do worst. China’s Yuan is at a ten-year low, prompting President Trump to renew his accusations of currency manipulation, and urge the Fed to drop interest rates and devalue the dollar in turn. The stock markets have reacted with a sharp ‘correction’ to the trade wars. Meanwhile the British pound has been trading at close to a long-term low in the face of mounting fears of a no-deal Brexit.

 

Gold, on the other hand, recently hit a six-year high, and bitcoin appears to be correlating well with its own bull run. Max Keiser suggested that confidence in centralised institutions and fiat was at a multi-decade low. 

 

There is a growing narrative and awareness that the established authorities don’t have the answers, and that putting some money in an uncorrelated and independent asset class could be a very good idea. JP Morgan gave their take on that; the wider market will decide what it means for bitcoin.

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