🙃 Bad Economic News Is Good News

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What’s on the Menu 🍴

When the economic outlook is a messy soup of conflicting information…

We’ve got your back!

Today we’re taking a look at market pullbacks, and why markets sometimes respond opposite of what seems rational.

Here we go!

• What to Watch This Week 👀

• Bitcoin's Pullback Pattern: What's Different Now? ₿

• Bad Economic News Is Good News 🙃

Today’s newsletter is a 5 minute read.

What to Watch This Week 👀

Stocks, bonds, and crypto prices rose last week after the Federal Reserve said it would reduce its pace of balance sheet reduction and US job market metrics came in weaker than expected.

Bulls are embracing an economic “soft landing” scenario while bears are calling out stagflation risks.

Last week the market seemed to favor the bulls, especially as crude oil prices fell under $80 per barrel:

This week the macro calendar will be lighter, so investors are likely to focus on price action and earnings news.

Big names such as Disney, Uber, Airbnb, Shopify, Palantir, and Robinhood will report their Q1 numbers:

Macroeconomic releases will include the following:

• Federal Reserve Senior Loan Officer Survey (Mon)

• Germany trade balance (Tues)

• Canada PMI (Tues)

• China trade balance (Wed)

• UK rate decision (Thurs)

• UK Q1 GDP (Fri)

• Canada unemployment (Fri)

• US consumer sentiment (Fri)

• China inflation (Fri)

There could also be news coming out of the biotech sector during the ASGC conference this week, as well as potential rescheduling headlines in the cannabis sector.

Meme stocks such as GME & DJT perked up last week, as did Chinese stocks, so we’ll keep an eye on those.

Sam Altman backed nuclear energy startup Oklo will be going public via SPAC this week, and the action could be volatile as the ticker shifts from ALCC to OKLO.

We’ll be watching that as well as the following assets & sectors:

📈 Rising Recently:

• Utilities (XLU)

• Chinese tech (KWEB)

• Cleantech & Solar (TAN / PBW)

• Biotech (XBI)

• Homebuilders (XHB)

• Small Caps (IWM)

📉 Falling Recently:

• Energy (XLE / XOP)

• Gold Miners (GDX / GDXJ)

• Silver (SLV)

Bitcoin's Pullback Pattern:
What's Different Now? ₿

FIVE.

That’s the number of times bitcoin has pulled back over 20% since the start of this bull market in January 2023.

And each time leads to bitcoin haters speculating that “this is the end”.

What’s the biggest difference between this market cycle and the prior cycles from 2013, 2017, and 2021?

Well, the volatility is actually FALLING.

You see, in prior bull markets, bitcoin has seen dozens of pullbacks in between 30%-50%.

But as more liquidity and market participants enter the trading arena, the percentage of gains and losses decreases over time.

Another interesting thing to note this cycle is the correlation with stocks…

Sure, bitcoin has crushed the S&P 500’s gains over the past decade, but one thing bitcoin investors should watch out for is stock market crashes.

Why?

Because most of the time that stocks pullback, bitcoin follows along with it.

So we think it makes sense to keep an eye on when the stock indices are showing weakness to find opportunities to scoop up some BTC at a discount.

Bad Economic News Is Good News 🙃

You would think that lower job openings and wages slowing would spook the market into a selloff.

After all, the stock market really depends on a thriving economy.

But, this isn’t your grandpa’s stock market, or monetary environment.

This market wants to see interest rates lower… and a weakening economy may ensure that will happen for investors.

So yes, oddly, the “bad” news we received on Friday with the non-farm payrolls report (jobs report), sent the market flying higher.

The big question would be is this a blip on the radar (similarly to what we saw in October 2023), or the start of a new ominous trend?

The S&P 500 was starting to look like it was going to rollover to continue its downward trend.

Most chartists would have seen the price action before the report with a “proceed with caution” attitude.

However, one day can make all of the difference in price structure.

Now, attitudes are flipping quickly as the hope for lower rates are expected to be a boon on the economy (and corporate earnings).

Of course, the whole issue with the Fed is they don’t want to see inflation stay sticky… lower rates could cause this as consumer spending has been resilient in certain categories.

So, there seems to be a battle between the market wanting to see lower rates for an economic boost, and the Fed wanting to keep a lid on rates to keep inflation under control.

It feels like quite a battle of desires.

Perhaps the market simply believes this will all balance itself out. Weaker economic data and rates lowering will work together in the end for a happy medium.

Either way, seems like continued weakness in data may just bring a rally in stocks.

Food For Thought 🧠

"Fear incites human action far more urgently than
does the impressive weight of historical evidence."
- Jeremy Siegel

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.