Last week’s market summary (July 4th-July 8th, 2022):
- S&P 500: +3.13%
- Dow: +1.95%
- Nasdaq: +5.71%
- Bitcoin: +13.23%
Recession talks have been all the rage lately. But the labor market hasn’t been listening. It turned in another strong performance in June in defiance of the doom and gloom predictions.
Still, we do have a major inflation problem in the U.S. Things are expensive out there and affordability has become a serious problem for many households. In an effort to help, many states are beginning to propose inflation relief checks. But is that a self-defeating plan?
The crypto liquidations and consolidations continued last week in the ongoing aftermath of the most recent crypto crash. And the Musk/Twitter saga made headlines yet again. Here’s what you need to know about each of these stories and more.
What Everyone’s Been Buzzing About
Job creation surges in June. U.S. employers added a strong 372,000 jobs in June, defying fears of a looming recession and providing further evidence that the labor market remains robust. The unemployment rate held steady at 3.6%, close to its pre-pandemic low, according to the latest Labor Department data.
- So we’re not in a recession? Well, it depends on how you define it. Historically, many have defined a recession as two straight quarters of GDP decline. We’re likely to meet that definition when Q2’s GDP is released in September. However, the National Bureau of Economic Research (NBER) takes a more holistic approach to defining recessions that includes several employment metrics. In short, the NBER may feel less inclined to pronounce that we’re in a recession as long as the job market is still in growth mode.
State inflation relief checks are coming. At least 20 states have proposed or already approved sending “inflation relief checks” to their residents. Most recently it was announced that qualifying Californians will receive checks of up to $1,050 starting in October.
- Hold up — does this make sense? With many states currently enjoying budget surpluses, these efforts are being positioned as a way to help people deal with the rising cost of essentials like groceries and gas. However, many experts worry that this could actually just add more fuel to the inflation fire and end up driving prices higher.
FTX US could buy BlockFi for as little as $25 million. It’s been a tough few months for the crypto industry. First, prices took a nosedive and then major companies began to lay off staff. The latest development is that FTX US, owned by billionaire Sam Bankman-Fried, has provided a credit facility to BlockFi that includes a purchase option.
- Ouch. The maximum price would be $240 million but sources say the minimum could be as low as $25 million. According to Pitchbook, BlockFi’s latest private valuation was $4.5 billion. So a buyout price of $25 million to $240 million would represent an eye-watering drop in value of 95% to 99%.
Musk terminated his deal to buy Twitter. For over a month now, there have been rumblings that this could happen. Musk has voiced concerns that Twitter has more fake accounts than they are admitting (they say the number is less than 5%). Now, he says he no longer wants to go through with his deal to buy the company and take it private. But Twitter’s board isn’t backing down; and their merger agreement with Musk includes a $1 billion breakup fee.
- Lawyer up. Musk’s suspicions may ultimately be correct. But it’s difficult to verify how many accounts are actually fake. Even if the number is higher than what Twitter is saying, it might not be enough to let Musk back out of the deal without paying up. And the board’s chairman has already announced on his Twitter profile (because where else, right?) that the company intends to pursue legal action.
Grayscale's ETF application denied by SEC. Grayscale Investments' attempt to convert its $13.5 billion Grayscale Bitcoin Trust (GBTC) into a spot-based Bitcoin ETF was rejected by the SEC on Wednesday, much to the chagrin of the company. Among other concerns, the SEC said that Grayscale’s application did not sufficiently answer questions about how it would prevent market manipulation.
- Good luck. Grayscale is suing the SEC because it says that the rejection was unjustified and prevented the company from unlocking $8 billion in value. But insiders say that the case will be a hard one to win.
What To Keep Your Eye on This Week
Inflation, inflation, inflation. I’ve never limited this section to just one economic event, but inflation really seems to be all that matters right now. It’s completely controlled the economic narrative throughout 2022.
Each month, we’ve anxiously waited to see the new Consumer Price Index (CPI). And, almost invariably, it’s gone up. If the stock market has any chance of mounting a sustained recovery in the second half of the year, we need to start stringing together some monthly declines.
Hopefully, that streak starts on Wednesday when the CPI for June is released.
Here are two stories and a podcast episode from around the web that our team found interesting:
- A Crisis Historian Has Some Bad News for Us (The Atlantic)
- Actually, a Recession is Inevitable (Politico)
- Are N.F.T.s All Scams? (Freakonomics Radio)
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