FOMC: Raise Rates or Just Raise Eyebrows 🤨

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GM and BRRR.

Today's market landscape presents a mixed bag of reactions, driven by a combination of factors. The release of the consumer price index (CPI) data, showing a mild increase in inflation, has left traders and investors relatively unfazed. The CPI rose by 0.1% MoM and 4% YoY, reaching its lowest level in about two years, while core CPI, excluding food and energy, climbed by 0.4% MoM and 5.3% YoY.

Amidst this news, Goldman Sachs CEO David Solomon issued a warning about the US economy, drawing parallels with a "recession-lite" scenario, and keeps mentioning that sticky inflation. Solomon expects the Federal Reserve to raise interest rates in the future, although immediate action is not foreseen.

Adding to market complexity, crypto lawsuits filed by US regulators have cast a shadow over the altcoin market. The SEC now considers certain altcoins as securities, resulting in significant price declines. Potential consequences loom for US crypto exchanges, which may be compelled to close altcoin pairs due to the SEC's classification.

Investors are adopting a wait-and-see approach as current market sentiment seems to prioritize stability (just wait and see). As the Federal Reserve's FOMC meeting unfolds today and tomorrow, investors will closely monitor how the central bank balances economic growth, inflationary pressures, and potential regulatory changes with forthcoming interest rate changes.

Here’s what we’ve BRRR’d:

• Market Reaction to CPI: A Resounding Meh

• Goldman Sachs CEO Predicts 'Recession Lite' Diet for US Economy

• Altcoins Sing the "Insecurity Blues" as Lawsuits Take Center Stage

Market Reaction to CPI: A Resounding Meh

• CPI increased lowest in two years: The consumer price index (CPI) rose by 0.1% month-on-month (MoM) and 4% year-on-year (YoY), reaching its lowest level in about two years.

• Core CPI rises: Excluding food and energy, core CPI increased by 0.4% MoM and 5.3% YoY, suggesting that price pressures persist despite some moderation.

• Market expect no rate hike: Consensus estimates were in line with the CPI data, leading to market pricing of a nearly 100% chance that the Federal Reserve would not raise interest rates.

• Gasoline prices drop: Gasoline prices have fallen by 19.7% YoY, playing a significant role in moderating the overall CPI figures.

• Food & shelter prices still up: Food prices remain elevated, increasing by 6.7% YoY, while shelter prices have risen by 8%, indicating continued cost pressures in these sectors.

  CNBC

Goldman Sachs CEO Predicts 'Recession Lite' Diet for US Economy

• GS CEO warns of recession-like environment: David Solomon, CEO of Goldman Sachs, cautions that the US economy may experience sluggish growth and sticky inflation, resembling a recession. While the latest jobs report shows increased payrolls, higher wages contribute to inflation as companies raise prices to offset labor costs.

• More rate hikes due to inflation: Solomon expects the Federal Reserve to raise interest rates in the future, despite not anticipating immediate action. Strong economic indicators and stubborn inflation could lead to rate hikes, posing challenges to the economic environment.

• Real estate market under pressure: Solomon highlights the pressure on commercial real estate, particularly due to interest rate hikes. This constrains lending and makes capital more attractive, potentially crowding out economic activity. The collapse of Silicon Valley Bank and Signature bank, along with the sale of First Republic Bank, has changed the outlook for regional banks.

• GS preps for third round of cuts: Amid a slowdown in dealmaking and activity, Goldman Sachs plans its third round of job cuts. The company aims to rightsize the business and rebalance. Around 250 jobs are expected to be affected, including managing directors and other senior executives.

• Prior layoffs and banking consolidation: Goldman Sachs has already undergone significant layoffs, with up to 3,200 employees affected in previous rounds. Solomon emphasizes the need for more banking consolidation to ensure sector stability, although Goldman Sachs would have high criteria for making a bank acquisition.

  CNN

Altcoins Sing the "Insecurity Blues" as Lawsuits Take Center Stage

• Lawsuits hammer altcoins, impacting market value: Lawsuits filed by U.S. regulators have targeted altcoins, resulting in a significant decline in prices. The SEC now considers these altcoins as securities, affecting about 10% of the cryptocurrency market, and leading to losses for major players like solana, polygon, and cardano.

• U.S. crypto exchanges face closure: The SEC's classification of altcoins as securities could result in U.S. crypto exchanges being compelled to close altcoin pairs. This would increase operating costs for individual tokens and listing fees for exchanges, creating hurdles for implementing these changes.

• Cardano and Solana funding hurdles: The SEC's classification of tokens like cardano and solana as securities is likely to hinder their ability to attract funding from the U.S. This could impact the onboarding of developers and users and limit their growth potential.

• BTC & ETH show resilience: While altcoins have experienced significant price declines, bitcoin and ether have been relatively resilient. However, both still declined by around 4.5% and 8% respectively since the lawsuits were filed. This indicates that investors remain cautious about the overall crypto market.

• Altcoins may still attract value: Some market observers believe that the decline in altcoin prices could attract investors looking for value opportunities. Investment products tracking altcoins have seen small net inflows this year, unlike bitcoin and ether. Investors are willing to give altcoins the benefit of the doubt, hoping for their long-term success.

  Reuters

AI ART OF THE DAY

Today’s AI Art of the Day features Jerome Powell saying another prayer for today’s FOMC meeting. To raise, or not to raise; that is the question.

The BRRR’s Portfolio

Back into the green, as we await the Fed’s next move…

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The BRRR is meant for informational purposes only. It is not meant to serve as investment advice. Please consult with your investment, tax, or legal advisor before making any investment decisions.