The Morning After - THURSDAY MARKET UPDATE

Good Morning Everyone!

Prices as of 4 pm EST, 9/21/22; % YTD

MARKET UPDATE

Fed lifted interest rates by expected 75bps

• Third consecutive 75bps hike

• Powell signaled more to come

• Comments more hawkish than expected

• “The chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer”

• Current: 3.00-3.25%

• Median forecast has rates hitting 4.4% by end of 2022, 4.6% in 2023

  • 75bps in November followed by 50bps in December?

• New Dot Plot:

Bond Market reaction

• Yields on US Treasury bonds jumped on the Fed’s decision

• Highest yields since

  • US2Y - October 2007 (>4%)

  • US10Y - February 2011

  • US30Y - April 2013

• Yields reaction:

US Q2 Current Account - deficit narrows

• -$251.1 billion vs. -$260.6 billion expected (prev. -$282.5 billion)

• Consensus -$260.6 billion

Initial jobless claims - labor market still strong

• 213k vs 218k expected (prev. 208k)

10 am EST - Conference Board Leading Economic Index (LEI)

• Current data point to already elevated recession risks:

Crude $83

• Prices dropped on Putin’s mobilization announcement

• US inventory levels - gasoline and distillate stocks remain below their 5-year ranges:

• The streak of declining US gasoline prices has ended after 98 days:

Earnings

• Accenture ACN

• Darden Restaurants DRI

• FactSet FDS

• Manchester United MANU

CRYPTO UPDATE

Stablecoin regulations: US vs. EU

• In the US, new bill would criminalize creation/issuance of algorithmic stablecoins (think Terra LUNC/USD)

  • Panel could vote as early as this week

  • Some existing stablecoins concerned, uncertain if they fall in this category

• In the EU, new draft of the markets in crypto-assets (MiCA) regulation removes limitations on stablecoins

  • Major win for stablecoin advocates

  • Leaves door open for regulations on DeFi and NFTs

Lockstep: Bitcoin and S&P 500

• 60-day correlation between BTC BTC/USD and S&P 500 futures hit 0.72 this week

• Just shy of May record

MEME OF THE DAY