Weekly Market Pulse: The Crypto Distraction

 

 

We get a lot of data next starting with our favorite broad indicator, the CFNAI which has been up big and down big recently. The 3 month moving average still puts growth slightly above trend but I would expect that the moderate this month. We’ll see. We also get durable goods orders and personal income and consumption numbers this week. 

 

US stocks were down last week as were commodities. Real estate was up again and I still expect more outperformance versus the S&P 500. Foreign markets were up last week and you might not have noticed but European stocks are outperforming the US YTD and over the last year. So are EM and Asia ex-Japan stocks. If the dollar really does get into a sustained downtrend I would expect that to continue. I’d also point out that the economic stats coming out of Europe actually look pretty darn good. UK data also looks robust, particularly retail sales.

 

Real estate, health care and utilities led last week which isn’t exactly inspiring from a growth perspective. 

 

Until just recently everyone knew that everyone knew we were going to have a boom once the virus was vanquished. When a consensus about the consensus becomes so strong markets more than fully price in the outcome. If the consensus turns out to be incorrect, markets have to reevaluate, sometimes quickly. So far, the recalibration – if that’s what this is – is moving at a leisurely pace. The same can’t be said of bitcoin and the crypto space and that to me is somewhat worrisome. Volatility in any market is a function of liquidity and that is true in both directions. Bitcoin’s rapid rise and fall is evidence of an extreme lack of liquidity. What continues to concern me is that crypto markets have attracted a lot of leveraged speculators who may not be able to sell bitcoin (or whatever other junk they own) if the downdraft continues. On Wall Street, the margin clerk doesn’t care what you sell just that you do. So, if they can’t sell bitcoin they’ll sell something else. I think you can imagine what that might be.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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