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:

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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:

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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

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