SODERMALM, STOCKHOLM – As 2020 winds to a close, it’s beginning to give me déjà vu. Everything has begun to feel 2017 all over again. Remember that year? Back when “Article 50” was plastered all over the press instead of “Covid-19”?
The Russians were being blamed for everything, from Brexit for Trump… The newly ascended Crown Prince of Saudi Arabia was announcing the creation of a massive paradise city-state in the desert… and there was that unexplained mass-shooting in Vegas – the worst in American history – that vanished from the news almost as suddenly as it had occurred. What motivated the shooter, a 64-year-old millionaire, remains a mystery.
Thankfully, it’s none of that which has given me the sense of déjà vu though. It’s this:
Source: Fuller Treacy Money
That’s a chart of the global stockmarket stocks (the MSCI World index) in blue, with the value of the global reserve currency (the dollar index) in green. As the dollar has fallen in value following a grand spike in March, the vast dollar debt weighing on the world has eased, which has been very positive for the world stockmarket. The MSCI world index has just had its best November on record – up 12% in just a month.
This dynamic similarly framed 2017 – the dollar had peaked in December 2016, and fell all year. The resulting environment was so benign, that you almost could have drawn the MSCI World index with a setsquare:
Source: Fuller Treacy Money
Just as gold had a strong 2016 but floundered in 2017, gold’s strong performance earlier this year has begun as interest rates have bounced from new all-time lows.
And just like 2017, bitcoin has once again begun a “moon mission”, though whether bitcoin has hit a new all-time-high or not depends on how eager you are to declare it. Due to the multitude of crypto exchanges, people have contrasting opinions on what was really the December 2017 high.
Personally, I’m just waiting on a price over $20k before I feel comfortable saying we’ve broken into all-time high territory – and we’re not quite there yet. We ain’t far though – at the time of writing, the average exchange value on CoinMarketCap is about $19,500.
Crypto Mania has indeed returned – just like so many other market trends from 2017. I feel pretty chuffed about this, as I predicted this would occur last December, in our 2020 predictions pack over at The Fleet Street Letter Monthly Alert…
I didn’t get every prediction in that issue right – I thought volatility was going to collapse as it did in 2017, but then the WuFlu showed up and it exploded like an atomic weapon.
But when it comes to the 2017 melt-up dynamic – and crypto especially – I was barking up the right tree. Here’s what I said back then:
Bitcoin took a punch to the face in March, but now, it’s come up smelling of roses. If you want to know what this oft-misunderstood asset is really about, you should read this.
I’m currently writing my contribution for next year’s predictions pack, and mulling over how long my feeling of déjà vu will last. Could this 2017 re-run last longer than a year? I guess we’ll find out – though we’ve a Santa Rally to look forward to first. Stocks have a habit of rising in the latter days of December as the festive spirit makes its way into financial markets… which could make this melt-up all the frothier.
What are your predictions for 2021? Let me know, and I’ll share them later on in the week: [email protected].
All the best,
Boaz Shoshan
Editor, Capital & Conflict
PS While I’ve owned bitcoin since before I worked here at Southbank Investment Research, the space is incredibly young and you learn new things about it all the time. My colleague Sam Volkering’s book is a great crash course on the basics – and you can grab a copy here for just a fiver.
Category: Investing in Bitcoin