Jun. 1 Markets Report: V-Shaped Recovery or Relief Rally?

Jun. 1 Markets Report: V-Shaped Recovery or Relief Rally?

The bleeding has stopped for now, as markets finally had a week in the green; the crude oil market is about to get really interesting; a Bond classic is heading to auction, and its expected sale price has a LOT more than two 0s.

Jun. 1 Markets Report: V-Shaped Recovery or Relief Rally?
Darry Port

Updated Jun 24, 2022

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Macro

Say Hello to My Little Rocket Systems

  • Russian forces have been making slow but steady progress on the second phase of their invasion. As of June 1st, they’ve captured both the city of Lyman and Svitlodarsk. 
  • Ukraine has requested that the US and UK provide them with Multiple Launch Rocket Systems (MLRS). The US is considering sending short-range (20–40 mile) MLRSes.
  • Russia has nearly $400 million in dollar-denominated bond payments due on June 23 and 24. But the Biden administration has banned Russia from using American banks, increasing their odds of defaulting. 

The U.K. Says No More Monkey Sex 

  • As of today, there are 555 confirmed cases of monkeypox in countries outside of Africa, with government officials saying that the virus is primarily spreading through sex
  • The UK currently has the highest monkeypox case count at 179, followed by Spain with 120. 
  • This virus doesn’t seem to be cause for too much concern as no monkeypox deaths have been reported thus far. 

GDP Growth Worse Than Expected

  • The Bureau of Economic Analysis revised their Q1 2022 Gross Domestic Product (GDP) estimate, which pegged GDP growth at -1.5% instead of the -1.4% that was initially reported. 
  • Last week, former Federal Reserve vice chair Alan Blinder told CNBC that there’s a  50% to 60% chance of a recession next year.
  • Eurozone inflation rose to 8.1% for the month of May, up 0.3% from April’s 7.4%.
  • The PCE (Fed’s preferred inflation indicator) for April came in at 6.3%, down 0.3% from March. Still elevated but US inflation seems to be slowing down.

Stocks & Bonds

V-Shaped Recovery or Relief Rally?

  • After eight straight weeks of nothing but red, the stock market finally blessed us with some green again. The Dow Jones rose 2.67%, the S&P 500 jumped 4.35% and the Nasdaq surged 6.78% for the week. 
  • Stock market sectors are also up across the board, with the biggest gainers being:
    • Consumer discretionary: 11.43%
    • Information technology: 7.26%
    • Telecom: 5.66%
  • Some chalk this rally up to the market being oversold, inflation cooling down or investors seeing some solid earnings from the retail sector. Whatever it is, do keep in mind that we’re still significantly down from previous highs and that we might experience another sell-off. After all, we’re still in the midst of a pandemic, war and supply chain disruptions.

You’ve Been Served

  • Twitter (TWTR) shares have dropped over 17% since Elon Musk offered to buy the social media platform on April 14, with the deal currently on hold until Twitter can prove that bots make up less than 5% of its users.
  • I think most of us can agree that some of Twitter’s negative performance is obviously due to the broader sell-off in tech stocks. Still, Twitter shareholders have filed a class-action lawsuit against Elon Musk for manipulating the market so he can negotiate a better deal price. Let’s see if this suit holds up in court. 

We’ve Reached Peak Fed Hawkishness… Hopefully

  • U.S. Treasury yields rose over the past week as investors are beginning to believe that we’ve hit peak inflation and Fed hawkishness. This, in turn, means that they’re selling bonds and pumping money back into stocks. 
  • To that end, the US 10-year treasury note bumped up to 2.82% while the 30-year note rose to 3.04%.

Real Estate 

End of the Housing Frenzy 

  • Mortgage rates have continued to fall, with the 30-year fixed rate currently sitting at 5.25% as compared to 5.36% last week. 
  • As with the previous week, the housing market is experiencing a pullback in demand.  According to U.S. Census data, sales of newly built homes dropped 16.6% in April from March — the slowest sales pace since the start of the Covid pandemic.
  • This is overall positive news, but as with the bounce in equities, there’s no guarantee that rates and demand will keep moving in this direction as macroeconomic conditions are still fragile. 

Crypto

Long Squeeze Incoming

  • At the start of the week, crypto investors breathed a sigh of relief as Bitcoin (BTC) put in fresh gains of 8.16%, bringing its price back over the $30k level. Ethereum (ETH), which has also suffered weeks of losses, isn’t quite done bleeding yet at a -1.23% weekly performance. Some analysts are calling this rally a “dead cat bounce”, however, and predicting that BTC won’t make it past $34k. 
  • The best-performing crypto sectors this week include Decentralized Exchanges at 175.14% and the Terra ecosystem (who would’ve guessed, right?) at 28.55%.

Justin Sun’s Tron is Outshining Other L2s

  • Tron, a long-time top 20 crypto project, has recently overtaken Avalanche and Solana in Total Value Locked (TVL). 
  • All this fresh capital flowing into the Tron ecosystem has been attributed to the launch of USDD, an algorithmic stablecoin offering over 20% yields similar to the late UST. They never learn, do they?

A Phoenix Rising from the Ashes

  • Terra’s rebirth proposal passed last week’s governance vote and Terra 2.0 went live on May 28th. 
  • The launch was supported on multiple exchanges like Binance, Bybit, FTX and Kucoin, with the new LUNA token opening as high as $30. As of today, it’s chilling at $8.49. 

Fiat Currency Airdrops Are a Thing Now

  • According to a new European Central Bank (ECB) report, one in ten EU households now own cryptocurrency. 
  • The Chinese city of Shenzhen is airdropping 30 million digital yuan to stimulate consumer spending amid the country’s COVID-related economic downturn. 
  • MoneyGram, one of the world’s largest cross-border payment companies, is partnering with the Stellar blockchain to enable USDC payments on their money transfer platform. 
  • Banking giant JPMorgan now considers cryptocurrency its “preferred alternative asset class”. Furthermore, JPMorgan analysts stated that Bitcoin’s fair price is $38,000 — 20% up from today. 

NFTs

Goblin, Ghouls and Zombies with No Conscience

  • While retail interest in NFTs has cooled down for the time being, the $26+ billion NFT market has held up decently, only shedding -1.34%. 
  • This week’s top NFT collection is Goblintown, a profile picture set featuring mythical characters like goblins, wizards, unicorns and dwarves. 
    • Volume: $20.25M
    • Sales: 6,522
  • The top sale of the week, on the other hand, goes to Bored Ape Yacht Club #5177 at 250 ETH ($448.09k).
  • Solana’s NFT scene has been neck-and-neck with Ethereum as of late. The recent launch of the Trippin’ Ape Tribe collection generated over $24 million in sales, briefly nudging Solana past Ethereum’s NFT market volume. Will Solana soon become the blockchain of choice for NFTs?

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GoblintownNFT, Source: DappRadar

NFT Art IRL

  • Solana-based move-to-earn NFT game STEPN has banned all Chinese users due to the country’s anti-crypto policies, with the GMT token dumping 20% following the announcement. 
  • On May 22, someone hacked into digital artist Beeple’s Twitter account and posted malicious links to fake NFT drops. No one knows how many users took the bait, but a MetaMask security developer estimates that these links could have resulted in $438k in losses. 
  • The 2022 edition of Art Basel Hong Kong was kicked off on Wednesday, featuring 130 galleries from 28 regions. The Tezos blockchain had its own booth there, displaying generative NFT art from artists like Ryan Bell. 

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Source: ARTnews

Commodities

The Russian Oil Embargo is a Go

  • Last week, the EU agreed to ban 90% of crude imports from Russia by the end of the year. 
  • Oil prices spiked following the news, with WTI and Brent oil reaching $119 and $124 respectively before cooling back down. 
  • Russian representative Mikhail Ulyanov scoffed at the EU’s extreme sanctions, saying that Moscow will find other importers. 

Averting a Global Food Crisis

  • With the Russian oil embargo secured, the EU has now turned its attention to easing the global food crisis by helping Ukraine export millions of tons of grain.
  • EU leaders are trying to convince Russia to remove its blockade of Black Sea ports so food can be shipped out. Putin has said that he’d cooperate in exchange for lifting some restrictive measures on Russia.

Collectibles: Trading Cards & Classic Cars

A Touchdown Investment

This Model Doesn’t Have Pop Out Gun Barrels 

  • The Aston Martin DB5 has become an iconic car, inextricably linked to the James Bond character ever since appearing in 1964’s Goldfinger.
  • A DB5 model personally owned by the late James Bond actor Sean Connery is being auctioned off on August 18 and is expected to fetch nearly $2 million.

Startups

Back to Billion-Dollar Rounds

  • According to Crunchbase, last week’s biggest funding rounds went to:
    • Renewable energy developer, Clearway Energy Group: $1.6B.
    • Aerospace manufacturer and transporter, SpaceX: $1.5B
    • Cybersecurity platform, Semperis, $200M.
  • Despite crypto markets currently being in the shitter, legendary VC firm Andreessen Horowitz raised another $4.5B fund to invest in early-stage and mature projects. This brings a16z’s total crypto/Web3 funds raised to over $7.6B. Talk about conviction.

WeSave the Planet?

  • Adam Neumann, the controversial founder of WeWork, has launched a crypto startup called Flowcarbon whose $32M funding round was led by a16z. 
  • Flowcarbon’s Goddess Nature Token (GNT), which runs on the Celo blockchain, is backed by certified carbon offset credits.

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