Ways to Go

Risk assets (including crypto) took a hit this week, as investors feared that the Fed’s “higher for longer” stance would drive the economy into a persistent recession.

Markets went into the week on a relatively dovish note, which was fueled by a soft CPI print confirming that the breadth of inflation was declining. Alas, Powell reminded us in the last FOMC meeting of the year that the Fed still has ‘some ways to go’ before a pivot.

Policymakers projected rates would end next year at 5.1%, according to their median forecast, before being cut to 4.1% in 2024. Markets had been pricing in a pivot in 2023, so this was more hawkish than expected.

It also appears to be a hawkish week globally where the ECB and BoE both hiked rates by 50bps, along with a slew of smaller economies.

Crypto markets were meaningfully down too on the back of continued recession fears. News that accounting firm Mazars suspended all work for its crypto clients (Binance, Crypto.com, and KuCoin) shortly after releasing “Proof of Reserves” reports for them, spooked markets as well.

Other notable headlines that dominated the headlines were SBF’s arrest the day before his supposed testimony to Congress.

More details surrounding the FTX saga emerged, where we discovered that FTX Digital Markets co-CEO blew the whistle on SBF, alerting the Bahamian authorities that customer funds were being used to fill gaps in Alameda.

We expect the December lull to kick in in the final 2 weeks of 2022 — and markets focused on the risks of a protracted recession in 2023.

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