The Macro Situation
Markets sit in expectation of what is in store for the Fed’s next rate hike. Slow and steady remains the pace, with a strong indication of a 25 bps hike this month and a terminal rate between 5.5%-6%. At the start of Thursday, the Dow was boosted slightly due to strong retail figures from the likes of Salesforce, Kroger’s, and Macy’s, which set the tone for an end of the week rally.
In addition, 10-year treasury notes briefly rose above 4% this week for the first time since October 2022. The 4% mark has been a rally indicator in the past. Typically, higher 10-year yields (and falling prices) translate into to higher confidence in the stock market, as liquidity moves from playing it safe to higher risk investments.
We’re looking up, but only so far as those pesky job numbers fall in line to help inflation become unstuck. Remember to ask any follow up questions on Discord.
Stock Watch
Stock Tickers to follow:
- Macro-Dependent: Gold (GLD), 7-10 Year US Bonds (IEF), SPY, QQQ
- Oil: XOM, RIG, SLB
- Green: TSLA … Volkswagen (?)
Gold has made a recovery from last week, which suggests that markets are pricing in future expectations with regard to rate hikes and, perhaps more crucially, that further tightening measures will not result in a stronger US dollar. The USD index has returned to ~104.
With higher trending yields and the markets pricing in future hikes, the lower bond prices signal a potential entry point.
China’s increasing demand for oil has been bolstering prices despite worries about a looming recession, though some pundits believe that the long-term situation concerning dwindling supplies will outpace other factors that typically drive oil prices down.
China’s increased activity is spreading to green energy as well. Tesla rebounded from a disappointing midweek after reports that Chinese wholesale numbers rose 32% from a year ago. TSLA closed just under the 200 resistance band it first breached a few weeks back.
Also, Volkswagen might still be cheap even after its recent surge.
Crypto Watch
Crypto Tickers to follow:
- “AI” Narrative: FET, AGIX, OCEAN, RLC
- “ZK Snarks” Narrative: MATIC, OPT
- “Bitcoin as L1” Narrative: BTC, STX
- “Play the Game!” Narrative: IMX
The announcement of the decentralized social media, Bluesky, going live was not enough to keep BTC above $23K. Overshadowing the good economic conditions was news about Silvergate’s demise and a subsequent liquidation of $62M in BTC long positions. Nonetheless, Bitcoin’s network development has a longer term potential for value.
Disney-backed Baobab Studios announced the Web3 game Momoguro, which will be a RPG-NFT game hosted on Ethereum’s L2 ImmutableX ($IMX). Along with high-end animation, the game creators are emphasizing its inclusive game-based world which embraces a community accepting of any ethnicity, gender, and body-type.
Though both AI and ZK crypto projects are suffering from this week’s market conditions, they are worth watching as new technology will benefit from the larger macroeconomic conditions (see above).
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