September Squeeze: Stocks and Bitcoin Enter High-Risk Period

The stock market often experiences a downturn in September, especially during US midterm election years. Over the last 10 midterm cycles between 1986 and 2022, stocks suffered an average drop of 16.77% from their previous high by the time they reached their lows.

This pattern is concerning, given that Bitcoin currently trades near $77,500, while US stocks remain close to record highs and long-term bond yields are unusually elevated.

The Federal Reserve is also discussing a potential rate hike, which could exacerbate market volatility. Fed Chair Kevin Warsh emphasized the importance of curbing inflation, stating that the 2% target is 'firm and fixed'.

Bond yields have been steadily rising, with the 30-year Treasury yield reaching 5.28% in August. The effective fed funds rate stands at 3.63%, which could indicate a more restrictive monetary policy.