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Inflationary Bear Market Spells Trouble For Investors

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The below can be an excerpt from the recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be one of the primary to get these insights along with other on-chain bitcoin market analysis right to your inbox, subscribe now.

Rates INCREASING

Yesterdays initial jobless claims data release came in below expectations, signaling a stronger labor market that is another very good news is bad news signpost.

We are able to see a few of these developments play out via the Eurodollar Futures curve where in fact the markets expected federal funds rate is steepening (more rate hikes), now likely to be over 4% in the next 1 / 2 of 2023. Thats good Federal Reserves own projections that theyve told the marketplace:

With more good news is bad news jobs data, the world’s inflationary bear market is spelling trouble ahead.

The markets expected federal funds rate is steepening (more rate hikes)

The S&P 500 Index now faces its fifth consecutive daily red candle and sits below some key technical areas which were holding as support.

After months of compression, volatility can be on the road with the VIX needs to climb higher alongside higher 1-month realized volatility across bitcoin, equities and Treasury bond futures.

Once we go to another long holiday weekend, its been an eventful day on the market with weakness and increased selling pressure turning up in several asset classes. Many of the most important moves have already been continued DXY strength as major market currencies continue steadily to bleed contrary to the U.S. dollar and the rise in sovereign debt yields with the U.S. 10-year over 3.25%. Yields across major European economies (Germany, Italy, Spain and Greece) are moving higher aswell.

The argument for rates have peaked has up to now been an incorrect or at the very least, early call, because the market has walked back their consensus expectations for a Federal Reserve pause or pivot timeframe into early 2023. The thesis of a deflationary bust and quick go back to a 2% inflation target continues to check further away as much of the Federal Reserve board members are publicly emphasizing the necessity to stomp out inflation no matter what on a media show-like tour, acknowledging that core problems haven’t abated. Jerome Powells Jackson Hole speech and Neal Kashkaris recent Oddlots appearance are obvious types of this.

Inflationary Bear Market

Comparisons to 2008 are misguided, because of the different inflationary outlook and macroeconomic backdrop.

With more good news is bad news jobs data, the world’s inflationary bear market is spelling trouble ahead.

2022 can be an inflationary bear market, in comparison to 2008’s credit-financed boom turned bust.

2008 was a credit-financed boom turned deflationary bust. 2022 can be an inflationary bear market, where both equities and bonds have sold off in tandem. A lot of the legacy financial and portfolio allocation is made upon the assumption that bonds and stocks won’t carry a confident correlation to the downside, and portfolio managers diversify accordingly.

Equities and bonds have already been positively correlated during the last year throughout a period where equities transpired. It is a first for the post quantitative easing fiat currency era.

With more good news is bad news jobs data, the world’s inflationary bear market is spelling trouble ahead.

In an initial for the post-quantitative easing fiat currency era, equities and bonds have already been positively correlated as equities transpired.

The positive correlation to the downside occurred again yesterday, as bonds got smoked on an enormous proceed to the downside. During writing U.S. Treasury bond futures are -1.99% for a secured asset that traded with a volatility of 15.54% during the last month.

With more good news is bad news jobs data, the world’s inflationary bear market is spelling trouble ahead.

Treasury bonds got smoked yesterday.

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