Darius joined Benjamin Cowen from Into The Cryptoverse earlier this week to discuss Inflation, the Labor, Liquidity, and more.
If you missed the interview, we have you covered. Here are three key insights that are important for your portfolio:
1) Despite The Recent Dovish Print on Inflation, We Believe The Fed Will Hike At The July Meeting
The money markets are currently pricing in approximately an 80% probability that the Federal Reserve will hike at their next meeting.
Generally, the Fed tends to move in sync with asset markets, acting according to what the market has priced in.
However, the Fed’s decisions are not purely inflation-oriented; they take into account labor market conditions as well.
Given these indicators, we believe the Fed will likely push through with the rate hike come July’s meeting.
2) Labor Hoarding Is Contributing to The Resiliency of The U.S. Economy
While the US Total Labor Force SA is trailing behind the pre-pandemic 2009-2019 trend, we have seen the Gross Domestic Income regain the trend shortly after the pandemic concluded.
This disparity tells us that there is an abundance of money in the economy but an inadequate labor force to meet the demand for goods and services.
Additionally, since March 2020, we have experienced labor demand outpace supply, with a staggering 3.9 million more in demand compared to available labor.
This excess demand for labor is causing labor hoarding, further strengthening the resilience of the U.S. economy.
3) We Are In A Liquidity Cycle Upturn; The Global Liquidity Cycle Bottomed In Fall of Last Year
Our 42 Macro Global Liquidity proxy, a sum of global central bank balance sheets, global broad money supply, and global FX reserves minus gold, shows a declining trend in recent months.
However, we believe the liquidity cycle bottomed last fall, and we are currently in the midst of a likely 2.5-year upswing.
Although we may see some turbulence over the next few quarters, Bitcoin, in this environment, could perform exceptionally well, pushing it above the $100,000 level by the end of next year.
In between now and then, we still anticipate a recession will commence in the US economy in the next two to three quarters, likely causing risk assets to fall as the Phase 2 credit cycle downturn sets in – a scenario that we believe has not been priced into the market yet.
We continue to believe risk assets will squeeze higher and peak in Q4 or Q1 of next year.
That’s a wrap!
If you found this thread helpful, go to www.42macro.com/appearances to unlock actionable, hedge-fund caliber investment insights and have a great day!