Markets started off today ahead of the bell in the red, waking up to results of a midterm rally that did not pan out the way many had expected. In normal times, the midterm elections after a new president’s term brings about big gains on Capitol Hill for the party out of the White House.
But as we’ve said in innumerable contexts in this space over the past couple years, these are not normal times. While the party out of the White House, the Republicans, may yet control both the Senate and the House in the next Congress, they’ll do so with the slimmest of margins.
So even though market participants may not like it, they’ve ultimately gotten what they wanted: gridlock. Passage of bills requiring only basic majorities — 51 votes in the Senate, 220 in the House — are the only sort that can expect passage, and those that do pass and take aim at the policies of President Biden’s will be met with the veto pen, without recourse to override it with a 2/3 vote. Anyone who’s passed the Constitutional exam should be familiar with this process.
In any case, a good chunk of the gains made off the post-Fed lows last week vanished in today’s trading: the Dow lost -646 points, -1.95%, the S&P fell -2.08%, the Nasdaq dropped -2.48% and the Russell 2000 was -2.75% on the day. This brings the painful totals in calendar 2022 thus far to the following: the Dow -11%, the S&P -22%, the Russell -22.5% and the tech-heavy Nasdaq -35%. Thus, we’re looking at the worst trading year for the Nasdaq since 2008, when it fell more than -40%.
FTX Deal Falls Apart. Does Crypto Follow?
Speaking of a good chunk of gains vanishing, crypto exchange Binance has walked away from its intended acquisition of rival FTX. Initially looking to swoop in and take over FTX to address its insolvency issues, Binance CEO CZ Zhao has now washed his hands of the deal, citing agency investigations and the possible mishandling of funds. FTX’s eccentric CEO Sam Bankman-Fried has now gone from being worth upwards of $15 billion to less than $1 billion, for an astonishing loss of 94% of his wealth is a single day.
Beyond the fortunes of wealthy crypto CEOs, the overall questions popping up regarding the valuation of crypto entities — and the non-crypto companies that invest in them — appear, to be kind, problematic. Especially on the already beleaguered Nasdaq index, where tech companies have often made a practice of holding crypto assets in diversified investment strategies, we may expect to see trepidation — and decisive corporate strategy moves out of the investment class — going forward.
Pulling back the focus a tad, and considering how good the pandemic era and subsequent government liquid capital disbursements were for the crypto market, it’s possible we’re seeing another iceberg crash into the ocean here. Depending on the exposure to the asset class, and how widespread this exposure, this might be one of those things that “breaks” meaningfully as the Fed sets about tightening interest rates to bring down inflation metrics.
Speaking of inflation metrics, we look toward Thursday morning’s October Consumer Price Index (CPI) report, where expectations are for the lowest headline read since February of this year. The core print is also expected to come down, albeit slower, to the mid-6% range. This is still upward of 3x the Fed’s optimum inflation level, but what analysts will be looking for are deeper-than-expected drops in these CPI sub-headline figures. Any risk to hotter numbers would likely be shrugged off as a cycle anomaly.
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FTX Deal Falls Apart: Do Risks to Crypto Investment Mount?
Markets started off today ahead of the bell in the red, waking up to results of a midterm rally that did not pan out the way many had expected. In normal times, the midterm elections after a new president’s term brings about big gains on Capitol Hill for the party out of the White House.
But as we’ve said in innumerable contexts in this space over the past couple years, these are not normal times. While the party out of the White House, the Republicans, may yet control both the Senate and the House in the next Congress, they’ll do so with the slimmest of margins.
So even though market participants may not like it, they’ve ultimately gotten what they wanted: gridlock. Passage of bills requiring only basic majorities — 51 votes in the Senate, 220 in the House — are the only sort that can expect passage, and those that do pass and take aim at the policies of President Biden’s will be met with the veto pen, without recourse to override it with a 2/3 vote. Anyone who’s passed the Constitutional exam should be familiar with this process.
In any case, a good chunk of the gains made off the post-Fed lows last week vanished in today’s trading: the Dow lost -646 points, -1.95%, the S&P fell -2.08%, the Nasdaq dropped -2.48% and the Russell 2000 was -2.75% on the day. This brings the painful totals in calendar 2022 thus far to the following: the Dow -11%, the S&P -22%, the Russell -22.5% and the tech-heavy Nasdaq -35%. Thus, we’re looking at the worst trading year for the Nasdaq since 2008, when it fell more than -40%.
FTX Deal Falls Apart. Does Crypto Follow?
Speaking of a good chunk of gains vanishing, crypto exchange Binance has walked away from its intended acquisition of rival FTX. Initially looking to swoop in and take over FTX to address its insolvency issues, Binance CEO CZ Zhao has now washed his hands of the deal, citing agency investigations and the possible mishandling of funds. FTX’s eccentric CEO Sam Bankman-Fried has now gone from being worth upwards of $15 billion to less than $1 billion, for an astonishing loss of 94% of his wealth is a single day.
Beyond the fortunes of wealthy crypto CEOs, the overall questions popping up regarding the valuation of crypto entities — and the non-crypto companies that invest in them — appear, to be kind, problematic. Especially on the already beleaguered Nasdaq index, where tech companies have often made a practice of holding crypto assets in diversified investment strategies, we may expect to see trepidation — and decisive corporate strategy moves out of the investment class — going forward.
Pulling back the focus a tad, and considering how good the pandemic era and subsequent government liquid capital disbursements were for the crypto market, it’s possible we’re seeing another iceberg crash into the ocean here. Depending on the exposure to the asset class, and how widespread this exposure, this might be one of those things that “breaks” meaningfully as the Fed sets about tightening interest rates to bring down inflation metrics.
Speaking of inflation metrics, we look toward Thursday morning’s October Consumer Price Index (CPI) report, where expectations are for the lowest headline read since February of this year. The core print is also expected to come down, albeit slower, to the mid-6% range. This is still upward of 3x the Fed’s optimum inflation level, but what analysts will be looking for are deeper-than-expected drops in these CPI sub-headline figures. Any risk to hotter numbers would likely be shrugged off as a cycle anomaly.
Questions or comments about this article and/or its author? Click here>>