Market Commentary

Worst First Half In 50 Years | Market Analysis for the Busy Investor

September 20, 2022

CEO and Co-Founder Ivan Zhang tackles the top market observations to start your week better informed. 

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Summary:

The stock market had its worst first half in 52 years, mortgage rates and bank loans will continue to tighten dramatically through 2022, and crypto lender BlockFi secures financing from FTX. 

Stock Market 

TLDR: The stock market saw its worst first half of the year in over half a century.

If you felt stocks performance was particularly bad this year, you are not alone. In fact, it’s been the worst first half of the year for over half a century! With rates rising across the board to fight inflation, bond investments have also taken a beating. Risk assets across the globe are coming down while the price of basic commodities are at near record highs. While copper is still trading at multi decade highs, it’s come down dramatically from its April all time highs, perhaps an early sign investors are scaling back long term capital investments as they struggle with the effects of high inflation.

Financial Conditions

TLDR: Financial conditions are tightening dramatically in 2022. This will hit end consumers in the form of higher mortgage rates and bank loans.

The Chicago Fed’s Adjusted National Financial Conditions Index (ANFCI) measures how tight conditions are, with readings above 0 indicating tighter than average. It has gone from a very loose credit environment to a tight one within 6 month. For reference, the only times it has been consistently positive within recent times was during the Great Financial Crisis of ‘08-’09, the Euro crisis of ‘12 and the COVID pandemic of ‘20. The Fed was behind the ball on tightening to stave off inflation this cycle, will it be also behind the ball on easing if financial conditions worsen?

BlockFi

TLDR: BlockFi secures $600mm+ financing while crypto prices remain stable.

BlockFi, a crypto focused lender, secures financing from FTX, a crypto exchange, for a total of over $600mm in a combination of debt and equity. It was previously valued at up to $5Bln! The dramatic collapse of its valuation underscores the turn of sentiment in the crypto space. While many say it’s not over yet, this seems like the proverbial green shoots following the crypto firesale.

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