The producer price index (PPI) is falling at the fastest pace since 1948, leading experts to warn of a severe economic reset. The rapid decline in the PPI is a concerning indication of the current state of the financial markets.
Notably, the bottoming of the high-beta inflation gauge may draw parallels to the financial crisis trough in 2009, according to senior Bloomberg commodity strategist Mike McGlone on May 9, who outlined that this is a worrying sign for investors.
McGlone suggested that the current market conditions may lead to a similar financial crisis and revealed that Bitcoin (BTC) might potentially hint at when the PPI will reach its bottom.
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“Bitcoin could help provide guidance on the outlook for further declines. When and where the high-beta inflation gauge bottoms may draw parallels to the financial crisis trough in 2009.”
Using Bitcoin to gauge market sentiment
Bitcoin, the world’s largest cryptocurrency, has become a popular tool for predicting market trends due to its decentralized nature and lack of government control.
With its decentralized nature and fixed supply, Bitcoin has been touted as a hedge against inflation. As the PPI declines, Bitcoin’s value could increase as investors look for a safe haven asset.
McGlone stated:
“The history of financial market busts that follow liquidity-driven booms is playing out in rapidly declining commodities and producer prices. It’s a question of how extensive the dump will be.”
He added:
“Commodities, down about 25% the past 12 months, are getting low if history is a guide, but the BCOM peak from June 2022 suggests PPI for next month, released on July 13, may approach the July 2009 nadir at minus 6.9%.”
The history of financial market busts that follow liquidity-driven booms is playing out in rapidly declining commodities and producer prices. This is a warning sign for investors who may consider to re-evaluate their portfolio and looking to diversify into safe-haven assets like gold or silver.
Gold neared an all-time high as US interest rates soared to their highest in over 20 years. Earlier this week, McGlone highlighted how gold could outshine Bitcoin in a downturn.
Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
