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7 charts from the past week that tell an interesting story in markets and investing…
1) Transitory Persistent Inflation
The high inflation numbers persisted in September, with a 5.4% increase over the prior year.
Here’s the breakdown among major components…
Producer prices also continued their upward trajectory, up 8.6% over the last year.
Meanwhile, Crude Oil prices rose to their highest levels in 7 years, and Gas prices did as well (average of $3.36 per gallon in the US).
2) 2022 Liftoff
The bond market is increasingly pricing in a liftoff in short-term interest rates in 2022, with 3-year (0.70%) and 5-year (1.13%) yields hitting their highest levels since February 2020. While the Fed has stated they are in no rush to raise rates, the market is starting to push them in that direction, with elevated inflation numbers becoming harder and harder to dismiss.
3) An ETF at Long Last
It’s finally here. The first Bitcoin ETF is expected to start trading next week under the ticker $BITO. Importantly, it will not invest in the crypto asset directly but instead hold a basket of Bitcoin futures contracts. This will lead to a deviation in performance versus the underlying asset as they are not one in the same (Bitcoin futures often trade in contango, where the future price is higher than the spot price, causing a negative roll yield).
The $BITO ETF and the many more that will follow are expected to create a new source of demand for Bitcoin, and investors are front-running that trend. Bitcoin hit its highest levels since April this week, and after a 55% correction are now within spitting distance of a new all-time high.
Here’s a look at Bitcoin’s market cap over the years…
An incredible stat: Bitcoin’s market cap has doubled 15 times in the past 10 years.
4) Social Security Surge
The 65 million Americans receiving social security benefits are about to see the largest increase in their benefits since 1982.
Calculated based on changes in CPI, the Social Security Administration announced a 5.9% bump up in monthly payments starting in January 2022.
5) 10 Baggers
When Cloudflare ($NET) went public 2 years ago it had a market cap of $5 billion.
This week it passed $50 billion, a 10x increase.
Not to be outdone, the market cap of Upstart (an AI lending platform) is over 14x higher than when it went public last December. $UPST
6) Telecom Troubles
Verizon ($VZ) and AT&T ($T) hit 52-week lows this week and both stocks are down on the year. The wireless providers are facing increasing competition from cable companies (ex: Charter, Comcast) and their heavy promotional incentives in recent months are expected to hit margins.
7) Big Bank Boom
The big banks all reported strong earnings this week with record quarters for M&A at JPMorgan, Morgan Stanley, Bank of America, and Citigroup.
The IPO boom is a big part of this, with a record $290 billion to-date far surpassing the prior record from last year ($167 billion).
Over the last year, big banks have widely outperformed the broad equity market…
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And that’s it for this week. Thanks for reading.
Have a great night and week ahead!
-Charlie
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