Last week the crypto Market continued to hold on for dear life in the face of increasingly bearish macro factors.
For starters earnings for the third quarter are starting to come out and every company from Big Tech to Banks is getting battered by the increasingly weak economy.
The most significant announcement came from Microsoft which confirmed that it will be cutting its Workforce.
Note that Microsoft is just one of many heavyweights that have announced layoffs in recent weeks and what we’ve seen so far is likely just the beginning.
Trust me when I say there is no shortage of stuff coming up, that’s going to shake up the markets now what’s odd is that Weekly jobless claims in the United States somehow came in lower than expected despite all these layoffs.
This suggests that the labor market continues to be strong and this is paradoxically bad for financial markets, this is of course because of the Federal Reserve.
Ted’s mandate is to keep inflation under control and prevent unemployment from getting too high.
Given that inflation is out of control and unemployment is somehow low this means the FED can continue aggressively raising interest rates and as you’ll all know raising interest rates basically means that money gets sucked out of the economy to pay back all the debts that individuals and institutions took on when interest rates were low.
With another rate hike coming in just over a week’s time investors are concerned that the markets could get wrecked.
At the same time some investors are speculating that the FED could deliver a less aggressive rate hike during its next meeting, this is simply because of the upcoming midterm elections in the United States.
Some investors believe that the current administration wants assets to be rallying when the ballots are passed.
Unfortunately for the current administration it looks like there’s no stopping FED chairman Jerome Powell who is determined to defeat inflation from the demand side.
This is concerning because most of the inflation is arguably coming from the supply side factors, at this point in time until governments realize that they can’t fight physics and start magically producing oil and gas you can bet that inflation is going to continue to run hot in most countries.
This means that interest rates will continue to remain high possibly for much longer than investors are currently pricing in for what it’s worth it takes between one and two years to set up oil and gas operations depending on the location as such the current period of economic pain shouldn’t last too much longer than that.
The only problem is that many businesses will not survive and the markets will be extremely volatile until things improve.
If that wasn’t bad enough there’s also a whole bunch of black swans swimming around such as an escalation of the war in Ukraine and China potentially taking Taiwan.