Stock Markets Are Surging After Jerome Powell Fanned the Flames of September Interest Rate Cut Hopes—Just After Issuing a \'Critical\' Warning

The S&P 500 and Nasdaq have notched fresh all-time highs, following in the footsteps of the Dow, which hit a peak in May, despite fresh debt spiral fears unsettling traders.

Stock markets have surged to fresh all-time highs this week, driven by hopes of a September interest rate cut from the Federal Reserve. But one analyst has warned that a recent bitcoin price crash could now trigger a sharp stock market correction.

The S&P 500 and Nasdaq have both hit record highs, following in the footsteps of the Dow, which hit a peak in May. But despite the fresh all-time highs, traders are growing increasingly concerned over the record levels of corporate debt, which have now spiraled to $10 trillion.

Now, as uncertainty hangs over the White House, one analyst has pointed to a surprise stock market warning that’s just begun flashing red.

The recent bitcoin and crypto crash, which has seen $500 billion wiped from the combined market in just over a month, could be about to trigger "an imminent S&P 500 summer correction," Barry Bannister, managing director and chief equity strategist at Stifel, told MarketWatch.

Bannister pointed to the correlation of bitcoin to stock markets and specifically the tech-heavy Nasdaq in recent years.

"It’s the availability of cheap, Fed liquidity that drives drives the price of bitcoin," Bannister said. "Every single dovish pivot for the past 13 years has marked a sharp bitcoin increase, and bitcoin is a non-interest bearing asset that thrives on lower interest rates and available liquidity"—much like stock markets.

In his second day of Congressional testimony this week, Fed chair Powell said he has "some confidence" inflation is falling but is not ready to declare the war on inflation won.

"Bitcoin has been a good leading indicator for the Nasdaq-100 over the years," Jonathan Krinsky, chief market technician at BTIG, wrote in a note ahead of the S&P 500, Nasdaq and Dow climbing this week.

For now, the momentum is with stocks as traders continue to bet on Federal Reserve interest rate cuts.

"Growing confidence over U.S. rate cuts kept the mood upbeat and the gains widespread," Dan Coatsworth, investment analyst at broker AJ Bell, said in emailed comments.

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