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
**New to this week’s report are the addition of AI-assessed sentiment scores for lead indicators and prominent stocks and coins. Scores range from 1 to 7, with 7 indicating the most positive sentiment.**
Battle of the Inflation Bulge . . .
Markets are pricing in the Fed’s comments that more interest rates are needed to lower inflation. The S&P dropped 0.76%; the Dow Jones 0.64%; and the NASDAQ 1.01%. Meanwhile, the Bank of England made a surprising move this week by increasing their rates by 50bps.
There may be some positive signs that the past rate hikes are having an effect. Jobless numbers remained high and steady last week (264,000 new claims).
Bond markets are adjusting, with expectations that the future rate hikes will not result in a historically strong 2-year bond (low yield, high rates). However, the 2-year adjustment does not alleviate concerns about the bond yield curve inversion, a major indicator of recession. The difference between the 2-year and 10-year bonds was as much as 1 percentage point at midweek. Long-term bonds will bounce once the impact of future rate hikes settles.
Last week’s gains in oil prices have been erased. Factors include: this week’s data indicating that while oil inventories decreased, gasoline inventories increased; the Fed’s news of future hikes; and worries that the economy may turn back towards recession. While the Weekly Economic Index fell 0.7%, GDP grew in Q1 and is expected to grow in Q2.
Gold and silver have also been adversely affected by the Fed’s news.
Macro-Dependent Tickers
- Long-term US Bonds: TLT - sentiment score 3.5
- Medium-term US Bonds: IEF - sentiment score 3.5
- Gold: GLD - sentiment score 2.5
Stock Watch
The EV industry in general is benefitting from inflationary pressures, worries about recession, and the fast development of new battery technology. Our Next Energy (not public yet) has developed a new Gemini battery which can power an EV over 700 miles with one charge.
Experts are expecting the average price of EVs to drop significantly as production costs become more efficient and, at least for US buyers, tax credits offset higher costs.
The AI/chip sector has proved mostly resilient after the Fed’s news on Wednesday.
Artificial Intelligence
- Sector Lead Indicator - QQQ - Sentiment Score 3.5
- Nvidia (NVDA) - Sentiment Score 6
- Other Tickers: MSFT, GOOG, META, AMZN, MU, AMD
Green Energy
- Sector Lead Indicator - TSLA - Sentiment Score 3.3
- Other Tickers: PLUG, GOEV, NIO
Crypto Watch
The Bitcoin Narrative has dominated headlines. With a surge in institutional interest due to the possibility of future financial restructuring in the US, BTC jumped above the $30k mark.
At the individual level, there has been an increase in illiquid wallets (HODL) drawing in BTC. Glassnode provides an illiquid supply metric for BTC and found that holdings rose to “a record high 15,207,843 BTC”.
Crypto Narratives:
- Sector Lead Indicator - TOTAL / BTC - Sentiment Score 5.2
- Bank Safety: BTC, STX
- DeFi / RWA: ETH, ARB, OP, JOE
- “AI” Narrative: FET, OCEAN, RLC, RNDR
-Todd Mei, PhD and Sebastian Purcell, PhD
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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.
