It’s been a rocky road this past week with markets reacting to both positive and negative indicators—from an encouraging lower producer price index to disappointing jobless claims numbers.
The overall consensus is that the Fed is easing its pressure with a 25-point increase in February and a projected terminal rate above 5%. Betting markets, at the time of writing, are putting a 94% chance of 25 bps rather than 50 bps.
Current volatility in the market is therefore a means of pricing in the next rate increase, though the mood is decidedly optimistic.
Stock Tickers to follow:
- Macro-Dependent: Gold (GLD), US Treasuries (IEI, IEF, TLT)
- Oil stocks: XOM, SLB
The US dollar index is still hovering around 102, with the expectation that it will drop further for two reasons.
- First, as the FED ends its hiking cycle, the relative strength of the dollar will fall.
- Second, should the US economy enter a recession (which is the consensus bet), the FED will have to print more dollars, devaluing the currency relative to other world reserve currencies.
- Gold is likely the most obvious beneficiary, followed by US Treasuries (held in ETFs).
Oil stocks remain in limbo, caught between the fear of recession and the expectation that China’s economy will rebound. XOM is worth noting due to completion of its Beaumont refinery expansion project, which added a third crude distillation unit. The unit will “increase the Beaumont complex's refinery capacity by 250,000 barrels per day, bringing the total to more than 600,000 bpd.”
Paying subscribers will continue to get weekly updates on these plays. It’s helpful to recall that the Bubble Portfolio last year made just shy of 13% and beat its benchmark by nearly 40%. Pretty good for a growth portfolio in a terrible market.
Crypto Tickers to follow:
- The Benchmark: BTC, ETH
- Pumping Coins: AI coins (FET, AGIX, OCEAN)
The crypto bounce last week featured BTC. As the bounce gained a little more momentum into this week, ETH made up ground on BTC.
It’s very likely that 2023 will be the start of significant investment in AI. Microsoft announced plans to layoff 10,000 workers and begin its shift to AI research and investment. The AOTB crypto ticker has added AI cryptos in FET, AGIX, and OCEAN.
As a reminder, our Dynamic Crypto Portfolio beat the benchmark by better than 60% last year and beat the “smart money” in the crypto space (as reported by Messari data) by roughly 76%.
Todd Mei, PhD
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