Gross Domestic Product, Second Quarter 2022 (Advance Estimate) - 0.9% decline

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Federal Reserve raises interest rates 75 basis points

<a target="_blank" rel="noopener noreferrer nofollow" href="https://threadreaderapp.com/thread/1546473254927433731.html">https://threadreaderapp.com/thread/1546473254927433731.html</a>TLDR: Net Liquidity (Fed balance sheet - Treasury General Account - Reverse Repo) delayed 2 weeks has had an extremely high correlation (R=0.95) with the S&amp;P 500 over the last 2 yearsChart: <a target="_blank" rel="noopener noreferrer nofollow" href="https://twitter.com/maxjanderson/status/1546473254927433731/photo/1">https://twitter.com/maxjanderson/status/1546473254927433731/photo/1</a>Thread by: <a target="_blank" rel="noopener noreferrer nofollow" href="https://twitter.com/maxjanderson">@maxjanderson</a>

Net Liquidity has had a 0.95 correlation to the S&P 500 over the last 2 years (with 2 week lag)

"Ok, two more charts and some thoughts...this time on crypto.... Is the accepted narrative of the BTC Halving cycle what drives the BTC cycle (and all crypto) or is it the macro? I'm starting to think it's all about the macro This is global M2 YoY vs Crypto market cap <a target="_blank" rel="noopener noreferrer nofollow" class="entity-hashtag" href="https://threadreaderapp.com/hashtag/Bitcoin">#Bitcoin</a>That suggest that liquidity and currency debasement are the predominant drivers, as opposed to supply. I have always erred on the side of demand being more important than supply in market prices of all goods. It is the demand ebb that causes the outflow and the denominator.Those macro cycles occur within the exponential secular crypto up trend and drive the market from overbought to oversold and back again to overbought, while the slope of adoption still persists...leading to higher lows every cycle...Note that global M2 growth is turning. Early days but crypto is forward looking in nature and turns earlier than most assets as its such long duration."

Raoul Pal - M2 Money Supply vs. Crypto Market Cap

Luke Gromen - Scariest Macro Setup in the Last 20+ Years

European Central Bank rises rates by 0.5%

* Consumer price index jumps 1.3% in June* Year-on-year CPI soars 9.1%, largest gain since 1981* Core CPI increases 0.7%; up 5.9% on year-on-year basis

U.S. Consumer Inflation Rises to 9.1%, Highest Annual Rate Since 1981

<a target="_blank" rel="noopener noreferrer nofollow" href="https://threadreaderapp.com/thread/1542120235599372288.html">https://threadreaderapp.com/thread/1542120235599372288.html</a>FinTwit is mentally exhausting these days, even after my holiday… the issue is one of probabilistic outcomesRight now there are more realistic possible outcomes than at any time I’ve ever worked in and as a macro investor my job is to endlessly reassess the odds of the outcomes. Hence why it’s exhausting! So, what are the main probabilistic outcomes?1. Recession where inflation is not fully brought to heel and thus rates remain higher for longer and inflation comes back after recession. This is the core FinTwit view and is very reasonable. This is the 1970’s redux view. I think we lack demand for this.2. Recession lowers demand and price rises fall back to the 2% range as 5 yr break evens suggest. The recovery when it comes does see commodity prices firm but % increases aren’t enough to drive inflation (like 2003 to 2008). This is my main view. A short sharp recession.3. Recession leads to negative inflation prints in 12 to 18 months as YOY effects of the Covid bullwhip come into play. I have significant sympathy with this view too. This is a repeat of 1947 to 1949.4. Recession is going to be longer and deeper and equities will get re-rated much lower. This is the 2002 redux and 2008. Again, quite probable although I don’t see all conditions in place. This is the VC held view and the value investor view. Growth tech is already -80% tho…5. It’s just a growth scare like 1985, 1987, 1994 and 2016 and recession is narrowly avoided. This is the outcome that would make most people wrong. It’s definitely possible. 2016 caught me off guard for sure.6. Recession where real rates need to get to 100bps or more higher to stop the inflation and that destroys everything but pleases those who think rates have been too abnormally low. I don’t put as high a probability on this but it’s possible.That is a wide range of outcomes that makes this very tricky to invest in. Peak cycle is always the hardest time to get clarity and patience is required.As ever I’m waiting for signals from bonds. When the equity/bond correlation reverses then that will call the cycle turn. I.e a leg lower in stocks = lower yields.The leg lower in stocks/crypto if it occurs will give us a lot more informational value as will ISM over next 2 months. The Fed have paused or reversed 100% of the time ISM crosses 50 since 1970.Let’s see how it pans out but all the loud differences of opinions on FinTwit are a very understandable outcome of the difficulties of assessing the broad probability distribution.Our job as investors is to hold all these outcomes in our heads, re-assess the odds endlessly and as Druck says, we need to decide what the world will look like in 18 months, not today.To me, that is lower rates (I think after fastest rise in history, this is an easier bet), rise in tech (tech trend doesn’t stop even if it gets re-rated more) and some squeezy commodities such as copper.But as ever, one step at a time. We first need to see the rate cycle turn.

macro

t/macro