Summer of Calm
After many months of negative news and extremely negative market sentiment, we may finally be reaching a point where investors have a moment to breathe and digest all of the new changes. Recently, bond markets and commodity markets have fallen sharply from their intense highs, signaling a possible relief for inflation numbers. The Fed, the main player in the current investment drama, relies on lagging inflation data to make its decisions. There is a risk the Fed will be too slow to react to falling prices as there is a sizable timing mismatch between market data and the once every 30-day inflation print. By definition, the Fed is designed to put out current fires rather than anticipate new ones. We can’t expect them to use market data to anticipate inflation.
Travel and restaurants are booming and the Fed and others say there are many signs we are in a healthy economy. I would argue that people are willing to spend any amount of money, including savings or selling investments at a loss, to once again spend time together. Covid continues to loosen its grip as the NYTimes app removed its Covid tracker icon from the main page and vaccines are now available for babies as young as 6 months old. This is really the first summer since 2019 where just about everyone feels comfortable traveling.
A recession seems likely and it would certainly not surprise anyone. The bigger question today is, “will a recession meaningfully impacts earnings, which have been strong throughout this market selloff?” In the broader context, economic aftershocks like the ones we have been going through following the mass shutdown of the global economy will come and go and should be expected.
It’s high time for a calm summer.
AI is set up to take off in a big way
There are rumors that with the crypto crash many talented engineers will transition to working on AI projects. Applied AI tools like Dall-E 2, AlphaFold or conversational AI in sales tools have made massive improvements in just the past year. A flood of new applications and tools could be just around the corner as the pace of development is clearly accelerating.
Crypto – the only guarantee in life is change
The pace of change in crypto is extremely fast. 2021 was a year of record crypto trading fees for brokerages. Now in 2022, Binance is the first to announce $0 trading fees on bitcoin. You can bet that in this highly competitive space, others will follow suit.
3AC, a $10B crypto hedge fund and a mainstay in the crypto community was liquidated following a series of cascading prices and project failures. 3AC was levering up many yielding assets, including Terra Luna and an arbitrage play on GBTC that also fell apart. Apparently, they offered a treasury management high yield (approx 8%) savings account to the startups they invested in. Unfortunately, that treasury is also now insolvent.
Many crypto assets are down between 50-90% year to date. Thanks to our risk management approach, our new crypto fund started in November of last year is down less than 10% over the same period.
The total crypto market cap peaked in November at $2.9T and has since fallen to $900B. This washout is putting pressure on crypto to prove its value. The more interesting metric is that over that same period Circle’s USDC stablecoin grew from $35B to an all-time high of $55B in total assets. A project like this doubling adoption during a severe market crash is saying something interesting about the next phase of the crypto evolution story. We wrote about this in May that bringing real-world assets on-chain is possibly the next chapter.
This communication may include forward-looking statements. All statements other than statements of historical fact are forward-looking statements (including words such as “believe,” “estimate,” “anticipate,” “may,” “will,” “should,” and “expect”). Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Various factors could cause actual results or performance to differ materially from those discussed in such forward-looking statements.”
“Historical performance is not indicative of future results. The investment return will fluctuate with market conditions.
Past performance is not indicative of any specific investment or future results. Views regarding the economy, securities markets or other specialized areas, like all predictors of future events, cannot be guaranteed to be accurate and may result in economic loss to the investor.
Investment strategies, philosophies, allocations and holdings are subject to change without prior notice.
This communication is intended to provide general information only and should not be construed as an offer of specifically tailored individualized advice.
While the Adviser believes the outside data sources cited to be credible, it has not independently verified the correctness of any of their inputs or calculations and, therefore, does not warranty the accuracy of any third-party sources or information.
Adviser does not endorse the statements, services or performance of any third-party vendor.
Unless stated otherwise, any mention of specific securities or investments is for hypothetical and illustrative purposes only. Adviser’s clients may or may not hold the securities discussed in their portfolios. Adviser makes no representations that any of the securities discussed have been or will be profitable.
Any IPO alerts are purely informational and should not be construed as recommendations to invest.
Adviser is not licensed to provide and does not provide legal, tax or accounting advice to clients. Advice of qualified counsel or accountant should be sought to address any specific situation requiring assistance from such licensed individuals.
Any case studies or hypothetical client profiles are for demonstration purposes only. They illustrate the breadth and depth of the many clients we represent at various life stages. Any similarities to actual Adviser’s clients past or present are strictly coincidental. Individual advice and results will vary based on each client’s circumstances, objectives and prevailing economic conditions.