Week in Review: Altcoins, Stocks and Gold Shine as 2018 Underway
For cryptocurrencies, stocks and gold, the path was certainly higher in the first week of 2018. In the stock and crypto markets, it was more or less business as usual following a soft end to December. Gold, on the other hand, took advantage of a weak U.S. dollar and growing doubts about the Federal Reserve’s ability to raise interest rates as quickly as it predicted.
Altcoins Dominate Crypto Market
Altcoins took the reigns from bitcoin this week, sending the global cryptocurrency market north of $750 billion. Bitcoin’s share of the overall market continued to dwindle, and by Friday, represented just 37%. At its lowest point this week, bitcoin accounted for just 32% of the market share.
Ripple and lesser known altcoins Cardano, Tron and Stellar surged to record highs, with each adding billions to their market cap. By Friday, Ripple’s XRP token was still the world’s no. 2 cryptocurrency, with prices nearly doubling over the course of the week. XRP briefly traded above $3.00 on Wednesday and Thursday.
Ethereum also reached an important milestone, as its native ether token crossed $1,000 for the first time. Ethereum continues to be the go-to protocol for startups issuing initial coin offerings (ICOs), a fundraising model that collectively raised more than $5 billion last year.
Wall Street’s Record-Setting Week
It was a stellar four days for U.S. equities, with all three major indexes reaching new milestones.
The large-cap S&P 500 Index and Nasdaq Composite closed at record highs each day this week. On Friday, the S&P 500 Index added 0.7% to 2,743.15, with nine of 11 sectors contributing to the rally. The technology-laden Nasdaq Composite Index rose 0.8% to close at 7,136.56.
The Dow Jones Industrial Average on Friday rose 220.74 points, or 0.9%, to finish at 25,295.87.
A measure of 30-day volatility known as the CBOE VIX fell more than 9% this week to close at 9.22, on a scale of 1-100 where 20 represents the historic average. Wall Street’s preferred barometer of investor anxiety came within half a point of record lows on Wednesday.
The benchmark averages gained between 2.3% and 3.4% in the first week of January. This week was also the first time the S&P 500 crossed 2,700, the Dow 25,000 and the Nasdaq 7,000.
Gold spiked to more than three-and-a-half-month highs this week, as the dollar bottomed out against the euro and a basket of other currencies. The February futures contract for bullion steadied at $1,320.30 a troy ounce on Friday, having gained 0.8% for the week.
The yellow metal has rallied more than 6% since Dec. 12, when prices bottomed near $1,241.00 a troy ounce.
The U.S. dollar index (DXY) declined to more than three-month lows this week, as investors opted for the more attractive euro and British pound. Market participants are also beginning to doubt whether the Federal Reserve will be able to gradually raise interest rates as planned. Nevertheless, the minutes of the December Federal Open Market Committee (FOMC) meeting, which were released this week, showed broad support for gradual rate rises.
For some analysts, gold is beginning to look overvalued following the latest rally. The technical indicators paint a similar picture, with the Relative Strength Index (RSI) signaling overbought conditions.
Nonfarm Payrolls Disappoint
The U.S. economy generated fewer jobs than expected last month, capping off one of the softest years for hiring since the recession. Nonfarm payrolls rose by 145,000 in December, well short of the 190,000 projected by economists. The jobless rate held steady at 4.1%, a 17-year low.
Despite the weaker job growth total, December was the 87th month U.S. employers added to their payrolls.
Just 24 hours earlier, payrolls processor ADP Inc. said private sector employers added 250,000 workers in December.
President Donald Trump will attempt to fuel job creation in the coming years through planned infrastructure spending. The Republican administration is already eyeing infrastructure as one of its next major priorities. The president is expected to infrastructure a top priority at the upcoming State of the Union address on Jan. 30.
White House officials are expected to release an infrastructure blueprint by the middle of this month, sources say.
The Trump administration scored a major legislative victory last month after both houses of Congress passed a $1.5 trillion tax reform bill.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
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