Market Commentary

Is The US in a Recession? | Market Analysis for the Busy Investor

August 1, 2022

CEO and Co-Founder Ivan Zhang tackles the top market observations for the week. Follow us on Twitter and Instagram to stay up to date in real-time. 

This week saw the biggest moves in markets, mainly precipitated by…

The Fed Hikes Once Again

TL;DR: The Fed hikes rates by 75bps while neutral commentary appears bullish for markets.

While the hike was mostly priced in prior to the meeting last week, markets were definitely in “risk on” mode post press conference. 

One key question asked was whether the Fed still considers the “risks of doing too little outweigh the risks of doing too much.” 

Powell was not willing to say risks were skewed to higher inflation. The neutral stance was viewed as dovish. 

Fed fund futures implied rates for Mid 2023 dropped by ten basis points relative to just before the meeting.

Another frequent concern during the press conference was a recession and how the Fed would respond if the U.S. economy entered a technical recession. 

On that note, Powell tried to remain neutral by saying that given the strong employment situation and many other indicators showing a healthy economy, keeping inflation in check would be the best way to sustain medium and long-term economic growth even if the GDP print comes out negative.

The US Enters Technical Recession

TL;DR: Second quarter GDP growth was negative, marking two consecutive quarters of negative growth, officially marking the start of a technical recession. 

Markets took that to mean that the Fed will have an easier time justifying pausing hikes or slowing hikes at future meetings and continuing their ascent. 

As Powell pointed out in the Fed conference the day prior, the advanced estimate of GDP is volatile, and measurements often get revised many months later that show a dramatically different picture. 

While it is important to take these numbers with a grain of salt, the markets seem to be jubilant with the prospect of easing food and energy prices and a softening economy, putting the brakes on aggressive future interest rate hikes.

ETH Merge for Final Testnet Announced 

TL;DR: With a mid-August timeline, the upgrade of the last testnet brings us closer to Ethereum’s long-awaited switch from Proof-of-Work (PoW) to Proof-of-Stake (PoS)

This has been a development many years in the making, with many participants waiting for this since the early days of Ethereum’s creation. 

With this last test phase scheduled, a successful launch later in September would effectively reduce the power costs of generating blocks on the Ethereum network by 99.9%.

It also opens the doors to many participants that were interested in using Ethereum’s blockchain but were put off by PoW’s costly block-generating process. 

Needless to say, combined with the general risk-on sentiment, ETH has made a tremendous comeback, nearly doubling from this year’s lows in the $800’s achieved in mid-May.

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