1: Everything seems to be going back to normal. Mask mandates are ending and people are returning to the office, yet we are in the midst of the 6th Covid wave. Daily cases and hospitalizations rival what we saw during the Omicron wave, but without the publicity.
Do we finally have this pandemic under control or have we simply given up? Probably a bit of both.
2: The rent is too damn high! Along with the prices of pretty much everything else, rents have risen significantly over the past year. Anecdotally, people are getting hit with 25% rent increases and some must choose between food or a roof.
Indeed, with the real estate boom spreading out of major cities as urbanites seek cheaper dwellings, locals are getting priced out of their own towns. When even the cheapest real estate markets become unbearably expensive for locals, what happens next?
Whatever happens, it won’t be pretty.
3: Pre-pandemic, Bitcoin had a low-to-negative correlation with stocks. The case for Bitcoin as a portfolio diversifier was legit. That all changed when the pandemic started.
As young investors received cheques from the government, they began to ‘invest’ (speculate, gamble) in meme stocks. At the same time, online trading platforms and the launch of various ETFs made it dramatically easier for anyone to invest in cryptocurrencies. As a result, correlations between Bitcoin and stocks rose because investor behaviour effectively transformed Bitcoin from an idiosyncratic asset to just another risk asset.
4: Two year US Treasury Bonds are yielding more than 10 year US Treasury Bonds. In other words, this part of the yield curve has inverted, signaling an economic recession is on the horizon. However, this metric is not for the impatient. As you can see in the chart below, the period of time between inversion and recession is usually months. However, the period of time between inversion and equity bear market is usually less, since stocks tend to be a leading indicator. And most recessions were historically paired with bear markets.
Intuitively, the yield curve’s current ‘prediction’ makes sense. Inflation is very high and the Fed will likely aggressively tighten to rein it in. In all likelihood, the Fed will eventually go a step too far - as they have many times throughout history - pushing the economy into a recession.