State of the Market (06/02/24)

By Todd Mei PhD | State of the Market | 2 Jun 2024

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The Macro Situation

lactic acid burn (noun)

  • the myth that sore muscles result from the byproduct of cells breaking down carbohydrates for energy (i.e. exercise);

  • the myth that the economy had been doing well all along and the resulting feeling of pain, panic, and worry when realizing the truth.

                                             ― New Entry in the Updated Devil’s Dictionary

The lactic acid burn in the economy might be starting to show. It’s comprised of debt delinquency and bond fatigue. 

  • Markets reacted strongly this week to the news of a disappointing US bond auction of 5-year notes. Weak demand meant the bid-to-cover ratio, which is the dollar amount of bids received compared to those sold, was lower than the 10-auction average (2.3 versus 2.45).

  • A huge signal of a lack of confidence in the economy, the lower ratio sent jitters across markets.

  • According to the Fed, delinquent debt is on the rise. Most significant is that “8.9% of credit card balances and 7.9% of auto loans have become delinquent annually.”

  • A bad debt situation can have knock-on effects with respect to consumer confidence, consumer spending, credit tightening, and lender solubility.

In other news, the Q1 GDP figure was revised down from 1.6% to 1.3%; the Personal Consumption Expenditures (PCE) index rose 0.3% in April; the PCE index (minus food and energy) rose 2.8% in April.

According to the Fed Watch tool, which tracks the prices of various futures contracts related to interest rates (particularly the federal funds rate), the chance for a rate cut in September is more or less flat compared to last week (46.6%).

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Up to the week ending on May 24, 2024, the ANFCI has moved to -0.58, which is a -0.01 increase from the previous week and a good sign for the investment climate.

Core Assets Update

Gold (2347.70) prices rose Thursday after economic jitters about the bond market and slower growth. However, on Friday, even the cooling indications from the PCE weren’t enough as investors were cautious about the Fed’s strong stance on requiring several months of higher rates.

Crude Oil (77.18) dropped after the U.S. government reported weakening demand and a rise in distillate fuel stockpiles, which includes diesel and fuel oils like kerosene.

The 10-year Treasury yield (4.502%) surged on the back of the weak auction of 5-year notes, but found some grounding by Friday after PCE inflation data matched estimates.

                                             -Todd Mei, PhD and Sebastian Purcell, PhD


AI Sentiment Report

The following sentiment scores use AI to track sectors as leading indicators. (Lesson 4 of The Art of The Bubble covers the selection of lead indicators for bubble trades). The scores are most indicative for the next day of trading (a Monday), but they appear to set the general tone for the next week. 

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-The Research Team:

                     Dom Viera, Samantha Russell, Nicole Zinuhova, Michelle Milan



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Todd Mei PhD
Todd Mei PhD

Todd is a former Associate Professor of Philosophy with over 16 years of research experience in the philosophy of work and economics. He is currently the lead researcher and writer for the Web3 consultancy group, 1.2 Labs.

State of the Market
State of the Market

Weekly reports on the state of the macroeconomy, stocks, and crypto compiled by the 1.2 Labs Research team.

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