Jul. 12 Markets Report: Brace Yourselves, We’re in for a Bumpy Ride

Jul. 12 Markets Report: Brace Yourselves, We’re in for a Bumpy Ride

Turmoil abounds in several G8 countries (can't wait to see what that means for world markets), the most talked about buyout of the year is in some serious trouble, and the crypto market may actually be turning the corner.

Jul. 12 Markets Report: Brace Yourselves, We’re in for a Bumpy Ride
Darry Port

Updated Jul 12, 2022

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Macro

Russia’s Just Getting Started

  • President Putin has issued a warning that Russia’s war in Ukraine is just getting started, and that peace talks are only going to get harder over time. 
  • On July 9th, Russian rockets struck an apartment building in the city of Chasiv Yar, resulting in at least 24 confirmed dead. 

Rising Political Crises

  • Amid a growing lack of confidence in the Prime Minister of the UK, Boris Johnson formally resigned as PM on Thursday, stating that he would stay on until his successor is appointed. Following the resignation, the British pound (GBP) shortly traded 1.05% higher at $1.205 before cooling back down.
  • In more troubling news, Shinzo Abe, the former prime minister of Japan, was shot and killed on Friday while he was delivering a speech in the city of Nara.

Recessions and Economic Collapses

  • Sri Lankan Prime Minister Ranil Wickremesing stated on Wednesday that the island nation’s economy has collapsed due to mounting debt plus fuel, electricity and food shortages.
  • Atlanta Fed’s GDPNow indicator estimates that the US’ second-quarter output will contract by 2.1%. If this holds up, then the US would officially be in a recession since the first-quarter GDP contracted by 1.6%. 
  • Despite macro conditions, the US economy shows strong job growth. Nonfarm payrolls increased 372,000 for the month of June, with the unemployment rate remaining at 3.6%.

Stocks & Bonds

Inflation Coming in Red Hot

  • This past week, the 2-year Treasury yield rose above the 10-year note, a so-called yield curve inversion that many investors see as a recession indicator.
  • Despite the fact that strong job growth is a positive for the US economy, investors also see these numbers as a reason for the Federal Reserve to continue hiking interest rates until something breaks. 
  • Investors will be looking at key inflation data this week, with June’s consumer price index (CPI) releasing Wednesday and the producer price index (PPI) due Thursday. Economists are expecting CPI to come in at 8.8%.

Bond Yields

  • US2Y: 3.0738%
  • US10Y: 2.989%
  • US30Y: 3.173%

Stock Market Indices

  • Dow: 0.38%
  • S&P: 0.87%
  • Nasdaq: 2.61%

Stock Market Sectors

  • Telecom: 4.92%
  • Consumer Discretionary: 4.55%
  • Utilities: -2.87%
  • Energy: -2.39%

Sorry Twitter, No Deal

  • While the primary stock market indices are all slightly up for the week, the market could flip in an instant following the release of June’s inflation data and corporate earnings in the coming days. 
  • Twitter shares fell over 17% after Elon Musk terminated his $44 billion acquisition of the social media giant, with Musk claiming that the company wouldn’t disclose its fake account numbers. 
  • In response to this, Twitter has apparently hired the law firm Wachtell, Lipton, Rosen & Katz to sue Musk.
  • Asian stocks took a nosedive on Monday as hundreds of bank depositors gathered to protest after being unable to withdraw their funds from certain banks in China’s Henan and Anhui provinces.

Real Estate 

  • The average rate on a 30-year fixed-rate mortgage is sitting at 5.84% this week, which is still high but down from its 6% peak in mid June. This rate will need to drop way more to lure buyers back into the market though. 
  • Right now, housing markets in northern California (and more specifically the Bay Area) are cooling faster than anywhere else in the US according to Redfin data.
  • Redfin also found that about 60k home-purchase agreements fell through in June, which is the one of the highest percentages they’ve recorded since 2017. 

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Source: Redfin

Crypto

Is the Bottom in for BTC?

  • After a 11% rally last week, BTC predictably slid back down to the $20,000 region. And with inflation data due in the coming days, risk assets like crypto could be in for another sell-off. 
  • Despite this dark macroeconomic cloud hanging over us, some analysts do believe that we’ve already seen the bottom for Bitcoin. Technical indicators like the weekly MACD are flashing bottom signals, the Crypto Fear & Greed Index has risen to 22/100 and major institutional players (e.g. crypto lender Celsius and bitcoin miner Core Scientific) have already sold a large part of their holdings. Miner capitulation, in particular, is seen as a reliable indicator of a price bottom. 
  • In other blue chip news, Ethereum has recently completed its second-to-last Merge trial on the Sepolia testnet without any major hiccups. The final Merge trial is set to take place in the next couple of weeks before the official Merge on the Ethereum mainnet.

Crypto Hedgies on the Run

  • DeFi lending protocol Aave is planning to launch its own decentralized, collateral-backed stablecoin called GHO. 
  • According to the bankruptcy filing of former billion-dollar crypto hedge fund Three Arrows Capital (3AC), no one knows the current whereabouts of founders Su Zhu and Kyle Davis.
  • Crypto exchange OKX, which doesn’t seem to be affected by the recent market carnage, just signed a training kit sponsorship deal with English football club Manchester City.

NFTs & Metaverse

$18 Mil in Stolen Apes

  • In the last 7 days, NFT Volume has spiked 13.82% to $273.6 million. This shows that the NFT market is far from dead, but it’s still way off from the $1.35 billion it was doing back in January 2022.
  • The top NFT sale this week belong to Bored Ape Yacht Club #6388, which traded hands for $1.08 million. 
  • In more worrying Ape news, a Dune Analytics user has found that over $18.5 million worth of Bored Ape NFTs have been stolen to date, highlighting the need for top collections and marketplaces to create better NFT security measures. 

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Bored Ape #6388

Source: Opensea.io

Don’t Call It an NFT

  • The first tech demo for BYAC’s Otherside metaverse is releasing on July 16.
  • DeFi lending platform Teller Finance has launched a buy now, pay later feature for major NFT collections aptly called Ape Now, Buy Later.
  • Content aggregation site Reddit has released Collectible Avatars, a set of limited-edition artworks created by independent artists and stored on the Polygon blockchain — but Reddit isn’t promoting them as NFTs.

Commodities

No, Everything Isn’t Golden

  • It seems as though traditional investors don’t have any safe haven assets anymore. Major commodity prices are now back to or below where they were before the Russian invasion of Ukraine. 
  • Gold, in particular, a historically reliable safe haven during war and inflationary times has shed over 4.3% since the start of July. Perhaps this is a sign that investors should start looking toward alternative stores of value like sports cards to hedge parts of their portfolios during these tough times.

The Gas Must Flow

  • Russian gas flows to Germany have been halted as submarine pipeline operator Nord Stream AG (owned by Russian gas giant Gazprom) performs maintenance work that’s scheduled to run through to July 21.
  • Germany’s energy officials believe that Russia may intentionally prolong the gas cut beyond Nord Stream AG’s scheduled maintenance date, exacerbating the region’s gas crisis this winter. If this worst-case scenario does come to pass, then Germany would be forced to start rationing their gas supplies to households and businesses nationwide.
  • Additionally, since Germany is the largest economy and gas consumer in the EU, the consequences (i.e. deep recession) are bound to spill over into the rest of Europe.
  • Due to these concerns, the euro has plummeted to a 20-year low on Monday and is trading close to parity against the US dollar.

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