Welcome to the free State of the Market report for the Art of the Bubble! Our subscriber plans make use of the same base algorithm that our crypto hedge fund, 1.2 Capital, does. It’s modified in timeframe and weighting so you don’t have to stare at your screen all day long. In 2022, for cryptos, the Dynamic Algorithm outperformed its benchmark by better than 70%. In 2022, for stocks, the Bubble Portfolio outperformed its benchmark by better than 40%. For those of you who are accredited investors, 1.2 Capital has re-opened new investor onboarding. If you are interested in learning more please reach out to us here.
The Macro Situation
Slightly mixed news for markets with respect to consumer and producer price indices. Inflation shows signs of abating as the CPI came in below 5%. While April’s PPI figures were slightly higher than expected, they remain down historically, being at their lowest since January 2021. Consumer sentiment data about inflation rounded down losses by the end of the week.
The slowing economy is good news for inflation, yet cost-of-borrowing pressures are still lingering with the banking system. Mid-sized banksare under watch as they try to balance losses on long-term bond investments with depository runs.
Ideally for the Fed, we’re at the start of a bottoming trend for inflation, whence a course for cutting rates can be entertained. About 30% of economists polled think easing rates could occur as early as July.
Bond yields are down, thus bond ETF prices are up.
Gold and silver dipped earlier in the week due to fears of a strong job market and persistent inflation. Typically, precious metals don’t do well after rate hikes end. However, if the end of rate hikes coincides with negative economic growth, gold and silver could bounce back. The other influencer is a US default.
Macro-Dependent Tickers
- Long-term US Bonds (TLT, IEF, IEI) - Expected to go up with rate pause
-Todd Mei, PhD and Sebastian Purcell, PhD
Stock Watch
AI remains the focus, and as the tech develops at an exponential rate, look for other tech demands cropping up as unexpected needs and uses arise. AI is truly unique in this sense of unexpected applications and uses.
As interest rates cool and as markets adjust to banking and lending pressures, long-term investments (i.e. bonds) are safer bets (see Macro above).
Stock Tickers to follow (in AI):
- Microsoft (MSFT)
- Alphabet (GOOG)
- Meta (META)
- Amazon (AMZN)
Crypto Watch
This week’s big news is the drop in BTC due to congestion issues with the BRC-20 token, raising transaction costs up to as much as $30. Assuming no other factors emerge, the downtrend should be temporary.
The XRP judgment still has not happened. Pundits are now expecting next month as the earliest target.
Overall, cryptos are down due to a drawback in liquidity. The crypto markets are still correlated as TradFi lenders (e.g. Jane Street, Jump Trading) are in caution mode post-FTA / Alameda. The odd DeFi crypto might benefit under these conditions as investors try to make the most out of a tightening market.
Crypto Narratives:
- Bank Safety: BTC, ETH
- SEC v. XRP
- “AI” Narrative: FET, RLC, GAI
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This newsletter was created by The Art of the Bubble/1.2 Labs and is provided for educational and entertainment purposes only. You should expect no financial returns one way or another based on the statements contained herein.Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.
