Rate hikes beyond a 5% terminal rate are now the consensus norm because last month’s is up, activity is up, and the Producer Price Index is up. The good news is that although last month’s CPI was up, year-over-year the inflation has dropped to 6.4%.
In response, traditional markets will continue to digest high bond yieldsand standard indexes are likely move sideways to down until the repricing these moves suggest is complete.
To put some of this in perspective, The Basic Economic Cycle Indicator that Paid Subscribers get is still a 2 of 5 for a reason. Credit spreads are bad. Volatility is bad. Bond yields are inverted. Futures markets are ... meh.
Everyone worries about a recession because of over-tightening. Most of the typical indicators still support a recession, they've just changed their sequencing to later in the year.
Remember to ask any follow up questions on Discord
Stock Watch
Stock Tickers to follow:
- Macro-Dependent: GLD, US Treasuries (IEI, IEF, TLT)
- Green Energy: TSLA
- Tech: GOOG, MSFT
The US dollar index has jumped from 102 last week to 104. Positive performance of mid- to long-term Bonds and GLD will be delayed by at least one month. On the front end, short-term treasury bills are seeing a rise, though currently not at a rate that is beating inflation
TSLA is still sitting above the $200 mark, which was seen as a resistance band, even after experiencing a recall of over 362,000 vehicles due to software safety issues. Early in the week, prices were boosted by the Biden Administration’s announcement of new regulations on EV chargers, which must now be built in the US with 55% of component costs coming from US companies by 2024.
AI remains a hot trend. Google has bounced back after last week’s debacle with its ChatGPT challenger. Google’s Quantum computing subsidiary, SandboxAQ, has raised $500M in funding. Hot trending typically involves growing pains but long-term value. MSFT has experienced similar hiccups to Google, with its AI chatbot making mistakes
Crypto Watch
Crypto Tickers to follow:
- The Benchmark: BTC, ETH
- L1s & L2s: MATIC, OP, AVAX
- AI Coins: (FET, AGIX, OCEAN, RLC, RSR)
- DeFi Exchanges: GMX, GNS, GLP, MLP
MATIC continues to benefit from wider platform development. This week it was announced that ZK-Rollups will be launched on Polygon in March 2023. ZKs are a huge part of the future development of on-chain security requiring minimal access to personal information. They have the potential to meet the needs of concerned, private individuals and government regulation. Square Enix will be launching a NFT game on Polygon, utilizing 10,000 character NFTs.
AI-related protocols remain the bread and butter of the crypto market, with AI-related coins boosting as much as 600% since AI started trending at the end of last year.
DeFi exchanges offering lucrative staking rewards continue to do well.
GMX has risen more than 50% over the last month. Madmex.io is still advertising 116% APR.
-Todd Mei, PhD
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