The S&P 500 has largely recovered from a historic market crash, rising 3.65% this week to sit just 2.5% away from a new all-time high. The rebound comes despite hot inflation data released in early November, suggesting investors are viewing recent weakness as a buying opportunity.
Last week's selloff was significant. On November 5, the Nasdaq Composite fell 5.5%, and the S&P 500 posted one of its biggest wipeouts in history. The decline was driven by an AI-related selloff on Wall Street.
The recovery has continued despite inflation remaining elevated. October's Consumer Price Index rose 0.4% month over month, above expectations of 0.3%. Core prices also climbed 0.3% for a third consecutive month.
In response to the inflation data, traders now price in an 87% chance of a Federal Reserve rate hike in December. However, falling oil prices have helped offset some inflation concerns.
Many investors appear to have bought the dip in AI and chip stocks as part of the broader recovery.
Bitcoin Lags Behind Stock Market Rally
Bitcoin has struggled to keep pace with equities. BTC trades near $74,400, roughly 40% below its all-time high. Spot Bitcoin ETFs saw nearly $1.3 billion in outflows in early November.
Bitcoin has recently behaved as a high-beta proxy for risk appetite, meaning a record-breaking S&P 500 could attract renewed buyer interest to cryptocurrency. However, rate-hike expectations present a headwind. Higher interest rates typically pressure non-yielding assets like Bitcoin more than profitable companies. Additionally, a stronger dollar resulting from higher rates could add downward pressure on crypto prices.
Throughout 2026, Bitcoin has moved in correlation with the stock market, driven by similar macroeconomic trends. The December Federal Reserve decision may ultimately determine whether cryptocurrency can sustain a rally alongside equities or face additional selling pressure.
