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There you have it - volatility is back.

Japan’s stock market index Nikkei crashed 5.8% overnight - its biggest one-day fall since 1987. Japanese stocks have reacted very poorly to the Bank of Japan’s 0.25% interest rate hike earlier this week.

Domestically, tech earnings are all over the map with Amazon and Intel disappointing, leading to 10% and 26% drops, respectively.

We got unemployment data this morning and it came in hot: 4.3% vs the 4.1% markets were expecting. Pair this miss with the Fed’s expectations of unemployment dropping this year, and you have a central bank dramatically offsides on one of its guiding metrics.

With the weakness in labor, markets are now expecting the Fed to cut interest rates not by 25 basis points at the September meeting, but instead 50 basis points and an additional 50 by the end of the year.

Many are questioning the Fed’s decision to leave interest rates unchanged on Wednesday, as a cut may have been prudent.

The Nasdaq is taking it on the chin down 2% today and 3.5% for the week thanks to the ominous tech earnings. Crypto is also down with bitcoin bouncing between $63k and $66k - an area it has spent months vacillating around.

We’re pointing all of this out to indicate stimulus and liquidity will arrive imminently, and we believe a tech and crypto heavy portfolio will produce outsized returns.

Have a great weekend!

Payroll Miss & Surging Unemployment To Trigger Aggressive Fed Action?

WHAT HAPPENED

• Payrolls Missed Expectations: US added only 114K jobs in July, way below the expected 175K.

• Downward Revisions: June's payrolls revised down from 206K to 179K, May revised down by 2K.

• Unemployment Surge: Unemployment rate jumped to 4.3% vs only 4.1% expected.

• Part-Time for Economic Reasons: Up by 346K to 4.6 million.

• Labor Force Participation: Slight increase to 62.7%.

WHY IT MATTERS

• Fed Rate Cuts Likely: Analysts suggest a 50bps rate cut could happen as soon as September due to economic cooling.

• Market Reaction: Risk assets falling, bonds and gold rising as investors move to safer bets.

• Political Implications: Rising unemployment and weak job growth present challenges for the current administration heading into elections.

• RBC: Fed might cut rates more aggressively than expected, with market concerns about economic growth.

Zerohedge

Bank Of Japan Hikes Rates While Rest Of World Cuts, Nikkei Index Tanks

WHAT HAPPENED

• Japan's Rate Hike: The Bank of Japan (BoJ) raised its key interest rate to “around 0.25%” from the previous range of 0% to 0.1%.

• End of Stimulus: BoJ plans to unwind its massive bond-buying program, easing back from a decade of stimulus measures.

• Historic Drop: Japan's Nikkei Stock Average plunged 2,216.63 points (5.81%) to 35,909.70 today, marking its second-largest daily drop ever, following the Black Monday crash of 1987.

• Market Reaction: The BoJ's recent policy decisions put the market in a precarious position, forcing a choice between stabilizing the yen and supporting the stock market.

WHY IT MATTERS

• Economic Struggles: Despite the rate hike, Japan's economy shrank by an annualized 2.9% from January to March, and consumer prices rose by only 2.6% in June, indicating sluggish consumer spending.

• Signaling Tightening: The BoJ's decision sends a strong signal towards normalizing monetary policy, potentially leading to further tightening, including another rate hike by early next year.

• Global Monetary Policy Shift: The yen is rapidly strengthening and the Japanese stock market is plummeting.

Japan Times

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