Your current mortgage (or future, if you’re among those trying to win a bidding war in a hot housing market). Your credit card. Your investment portfolio. All issues the Federal Reserve’s decision to raise rates affects.
Your portfolio saw a ‘goldilocks’ scenario as the central bank hit the “just right” tone with markets – hiking rates not too fast, and a forecast that was not too slow. Investors should enjoy the honeymoon – especially in the absence of negative war headlines.
The Federal Reserve told us they don’t expect a recession any time soon, but to expect interest rates (upon which your mortgage, credit card and other loans use as a baseline) to slowly rise to just under 2% by 2022-end, and to nearly 3% by the end of 2023.
And that matters, since that home Goldilocks stumbled into will get a bit more expensive to finance. 30-year mortgage rates rose above 4% this week (from 3% this time last year), according to Freddie Mac, the highest since 2019. That may continue to rise given the interest rate trajectory, and its impact may slowly make its way into homebuilding trends as some demand is sapped. In fact, the homebuilder ETF, XHB, is already on its back foot, down 18% in 2022 despite the headlines around an overheating housing market.
A final thought on this week’s decision. It’s possible that part of the big bounce in stocks was simply a reversal. Many of the biggest winners this week were the biggest losers of 2022 thus far. Also of note: stocks haven’t performed this badly going into a trajectory of rising rates since at least 1988. So seeing the strong positive reaction after a rough few months may not be altogether surprising.
We’re always sorting through the noise. One way to do that is by looking at divergence from trends. In this case, there are two cryptocurrencies that bucked the trend amid the market moves – Aave and Sandbox (SAND), both of which enjoyed social media mentions above their 30-day averages, according to Domain Money’s Signal** product.
Aave, a decentralized lending platform, launched new enhancements to its protocol. Not only that, but it did so across 6 different blockchains, something that Andrew Pesco, Domain Money’s head of investment management, sees as critical to helping avoid “copycats” on other blockchains. Aave is defending its “market” and “embracing a multichain future,” Pesco added.
SAND, the cryptocurrency behind the metaverse game Sandbox, soared 15% on the back of an announcement that the megabank HSBC purchased land in its metaverse – becoming the second large bank to make a similar move. JPMorgan made headlines earlier this month when it opened a lounge in Decentraland (MANA) – another metaverse opportunity.
Equities and cryptos have largely moved as one this year, and even among different cryptocurrencies, correlations to Bitcoin are approaching the highest in 3 years. But as 97 of the top 100 cryptos rose following the interest rate decision, Aave and SAND topped the list for reasons the Domain Money investment team say are fundamental to the investment case: adoption.
You can view key indicators in the app in the asset detail screen by selecting an asset from the home feed.
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* Domain Money Advisors, LLC, an investment advisor registered with the U.S. Securities and Exchange Commission and an affiliate of Domain Money, is currently recommending the following assets contained in this edition of Domain Money’s The Signal as part of Managed Strategies: AAVE, SAND, MANA, BTC
** These measurements were generated by Domain Money Social Sentiment Signal on 3/17/2022 and they fluctuate continuously in response to the various contributing data points and trends. Domain Money Signals are tools that aggregate information related to market sentiment and should not be relied on for investment decisions. More detailed information about Domain Money Signal is available at https://help.domainmoney.com/en/?q=signal